AUDIT REPORT ON THE ACCOUNTS OF FEDERAL GOVERNMENT(CIVIL) AUDIT YEAR 2010-11

AUDITOR-GENERAL OF PAKISTAN

TABLE OF CONTENTS ABBREVIATIONS AND ACRONYMS .................................................................. ix Preface ..................................................................................................................... xiii EXECUTIVE SUMMARY .......................................................................................... 1 AUDIT OBJECTIVE, SCOPE AND METHODOLOGY .......................................... 5 I. II. III. I. II. III. IV. Audit Objective .............................................................................................. 5 Audit Scope .................................................................................................... 5 Audit Methodology......................................................................................... 5 Audit Work Statistics...................................................................................... 7 Audit Observations classified by Categories ................................................. 7 Outcome Statistics ......................................................................................... 8 Irregularities pointed out ............................................................................... 9

SUMMARY TABLES & CHARTS ........................................................................... 7

CHAPTER 1 ............................................................................................................... 10 CABINET DIVISION ................................................................................................ 10 1.1 1.2 1.3 1.4 1.4.1 1.4.2 Introduction of Division ............................................................................... 10 Comments on Budget & Accounts (Variance Analysis) ............................... 11 Brief comments on the status of compliance with PAC Directives .............. 13 AUDIT PARAS ........................................................................................... 14 Non production of record ............................................................................ 14 Irregularity & non compliance .................................................................... 14

CHAPTER 2 ............................................................................................................... 17 MINISTRY OF COMMERCE ................................................................................... 17 2.1 2.2 2.3 2.4 2.4.1 2.4.2 Introduction of Ministry ............................................................................... 17 Comments on Budget & Accounts (Variance Analysis) ............................... 18 Brief comments on the status of compliance with PAC Directives .............. 19 AUDIT PARAS ........................................................................................... 20 Non production of record ............................................................................ 20 Irregularity & non compliance .................................................................... 21

CHAPTER 3 ............................................................................................................... 29 MINISTRY OF COMMUNICATIONS..................................................................... 29 3.1 3.2 3.3 3.4 3.4.1 3.4.2 Introduction of Ministry ............................................................................... 29 Comments on Budget & Accounts (Variance Analysis) ............................... 30 Brief comments on the status of compliance with PAC Directives .............. 31 AUDIT PARAS ........................................................................................... 32 Irregularity & non compliance .................................................................... 32 Internal control weaknesses ........................................................................ 33

CHAPTER 4 ............................................................................................................... 34 MINISTRY OF CULTURE ....................................................................................... 34 4.1 4.2 4.3 4.4 4.4.1 4.4.2 Introduction of Ministry ............................................................................... 34 Comments on Budget & Accounts (Variance Analysis) ............................... 36 Brief comments on the status of compliance with PAC Directives .............. 37 AUDIT PARAS ........................................................................................... 38 Fraud/Misappropriation .............................................................................. 38 Irregularity & non compliance .................................................................... 40

CHAPTER 5 ............................................................................................................... 53 ECONOMIC AFFAIRS DIVISION........................................................................... 53 5.1 5.2 5.3 5.4 5.4.1 Introduction of Division ............................................................................... 53 Comments on Budget & Accounts (Variance Analysis) ............................... 54 Brief comments on the status of compliance with PAC Directives .............. 55 AUDIT PARAS ........................................................................................... 56 Performance ................................................................................................ 56

CHAPTER 6 ............................................................................................................... 57 MINISTRY OF EDUCATION .................................................................................. 57 6.1 6.2 6.3 6.4 6.4.1 6.4.2 Introduction of Ministry ............................................................................... 57 Comments on Budget & Accounts (Variance Analysis) ............................... 57 Brief comments on the status of compliance with PAC Directives .............. 59 AUDIT PARAS ........................................................................................... 60 Non-production of record ............................................................................ 60 Fraud/Misappropriation .............................................................................. 63

ii

6.4.3

Irregularity & non compliance .................................................................... 65

CHAPTER 7 ............................................................................................................... 80 ESTABLISHMENT DIVISION ................................................................................ 80 7.1 7.2 7.3 7.4 7.4.1 Introduction of Division ............................................................................... 80 Comments on Budget & Accounts (Variance Analysis) ............................... 80 Brief comments on the status of compliance with PAC Directives .............. 82 AUDIT PARAS ........................................................................................... 83 Irregularity & non compliance .................................................................... 83

CHAPTER 8 ............................................................................................................... 89 ELECTION COMMISSION OF PAKISTAN ........................................................... 89 8.1 8.2 8.3 8.4 8.4.1 Introduction of Department ......................................................................... 89 Comments on Budget & Accounts (Variance Analysis)............................... 90 Brief comments on the status of compliance with PAC Directives .............. 91 AUDIT PARAS ........................................................................................... 92 Irregularity & non compliance .................................................................... 92

CHAPTER 9 ............................................................................................................... 96 FATA SECRETARIAT ............................................................................................. 96 9.1 9.2 9.3 9.4 9.4.1 9.4.2 Introduction of Secretariat .......................................................................... 96 Comments on Budget & Accounts (Variance Analysis) ............................... 97 Brief comments on the status of compliance with PAC Directives .............. 98 AUDIT PARAS ........................................................................................... 99 Fraud/Misappropriation .............................................................................. 99 Irregularity & non compliance .................................................................. 100

CHAPTER 10 ........................................................................................................... 105 MINISTRY OF FOOD AND AGRICULTURE ...................................................... 105 10.1 10.2 10.3 10.4 Introduction of Ministry ............................................................................. 105 Comments on Budget & Accounts (Variance Analysis) ............................. 106 Brief comments on the status of compliance with PAC Directives ............ 107 AUDIT PARAS ......................................................................................... 108

10.4.1 Fraud/Misappropriation ............................................................................ 108 10.4.2 Performance .............................................................................................. 109

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CHAPTER 11 ........................................................................................................... 111 FINANCE DIVISION .............................................................................................. 111 11.1 11.2 11.3 11.4 Introduction of Division ............................................................................. 111 Comments on Budget & Accounts (Variance Analysis) ............................. 114 Brief comments on the status of compliance with PAC Directives ............ 116 AUDIT PARAS ......................................................................................... 117

11.4.1 Non production of record .......................................................................... 117 11.4.2 Irregularity & non compliance .................................................................. 119 CHAPTER 12 ........................................................................................................... 128 MINISTRY OF HEALTH........................................................................................ 128 12.1 12.2 12.3 12.4 Introduction of Ministry ............................................................................. 128 Comments on Budget & Accounts (Variance Analysis) ............................. 129 Brief comments on the status of compliance with PAC Directives ............ 130 AUDIT PARAS ......................................................................................... 131

12.4.1 Performance .............................................................................................. 131 12.4.2 Irregularity & non compliance .................................................................. 132 CHAPTER 13 ........................................................................................................... 135 HIGHER EDUCATION COMMISSION ................................................................ 135 13.1 13.2 13.3 13.4 Introduction of Commission ...................................................................... 135 Comments on Budget & Accounts (Variance Analysis) ............................. 136 Brief comments on the status of compliance with PAC Directives ............ 137 AUDIT PARAS ......................................................................................... 138

13.4.1 Non production of record .......................................................................... 138 13.4.2 Fraud/Misappropriation ............................................................................ 139 13.4.3 Performance .............................................................................................. 140 13.4.4 Internal control weaknesses ...................................................................... 143 CHAPTER 14 ........................................................................................................... 145 MINISTRY OF INDUSTRIES AND PRODUCTION ............................................ 145 14.1 14.2 14.3 Introduction of Ministry ............................................................................. 145 Comments on Budget & Accounts (Variance Analysis) ............................. 146 Brief comments on the status of compliance with PAC Directives ............ 147

iv

14.4

AUDIT PARAS ......................................................................................... 148

14.4.1 Performance .............................................................................................. 148 14.4.2 Irregularity & non compliance .................................................................. 149 CHAPTER 15 ........................................................................................................... 151 MINISTRY OF INFORMATION AND BROADCASTING .................................. 151 15.1 15.2 15.3 15.4 Introduction of Ministry ............................................................................. 151 Comments on Budget & Accounts (Variance Analysis) ............................. 152 Brief comments on the status of compliance with PAC Directives ............ 153 AUDIT PARAS ......................................................................................... 154

15.4.1 Irregularity & non compliance .................................................................. 154 CHAPTER 16 ........................................................................................................... 157 MINISTRY OF INFORMATION TECHNOLOGY ............................................... 157 16.1 16.2 16.3 16.4 Introduction of Ministry ............................................................................. 157 Comments on Budget & Accounts (Variance Analysis) ............................. 158 Brief comments on the status of compliance with PAC Directives ............ 159 AUDIT PARAS ......................................................................................... 160

16.4.1 Irregularity & non compliance .................................................................. 160 CHAPTER 17 ........................................................................................................... 162 MINISTRY OF INTERIOR ..................................................................................... 162 17.1 17.2 17.3 17.4 Introduction of Ministry ............................................................................. 162 Comments on Budget & Accounts (Variance Analysis) ............................. 163 Brief comments on the status of compliance with PAC Directives ............ 164 AUDIT PARAS ......................................................................................... 165

17.4.1 Fraud/Misappropriation ............................................................................ 165 17.4.2 Non production of record .......................................................................... 166 17.4.3 Irregularity & non compliance .................................................................. 167 17.4.4 Internal control weaknesses ...................................................................... 173 CHAPTER 18 ........................................................................................................... 176 NATIONAL ASSEMBLY SECRETARIAT ........................................................... 176 18.1 18.2 Introduction of Secretariat ........................................................................ 176 Comments on Budget & Accounts (Variance Analysis) ............................. 176

18.3 18.4

Brief comments on the status of compliance with PAC Directives ............ 178 AUDIT PARAS ......................................................................................... 179

18.4.1 Irregularity & non compliance .................................................................. 179 CHAPTER 19 ........................................................................................................... 182 MINISTRY OF PETROLEUM AND NATURAL RESOURCES .......................... 182 19.1 19.2 19.3 19.4 Introduction of Ministry ............................................................................. 182 Comments on Budget & Accounts (Variance Analysis) ............................. 183 Brief comments on the status of compliance with PAC Directives ............ 184 AUDIT PARAS ......................................................................................... 185

19.4.1 Irregularity & non-compliance.................................................................. 185 CHAPTER 20 ........................................................................................................... 188 MINISTRY OF PORTS AND SHIPPING............................................................... 188 20.1 20.2 20.3 20.4 Introduction of Ministry ............................................................................. 188 Comments on Budget & Accounts (Variance Analysis) ............................. 189 Brief comments on the status of compliance with PAC Directives ............ 190 AUDIT PARAS ......................................................................................... 191

20.4.1 Non production of record .......................................................................... 191 20.4.2 Irregularity & non compliance .................................................................. 193 CHAPTER 21 ........................................................................................................... 196 MINISTRY OF RELIGIOUS AFFAIRS ................................................................. 196 21.1 21.2 21.3 21.4 Introduction of Ministry ............................................................................. 196 Comments on Budget & Accounts (Variance Analysis) ............................. 197 Brief comments on the status of compliance with PAC Directives ............ 198 AUDIT PARAS ......................................................................................... 199

21.4.1 Irregularity & non compliance .................................................................. 199 CHAPTER 22 ........................................................................................................... 201 MINISTRY OF SCIENCE & TECHNOLOGY....................................................... 201 22.1 22.2 22.3 22.4 Introduction of Ministry ............................................................................. 201 Comments on Budget & Accounts (Variance Analysis) ............................. 202 Brief comments on the status of compliance with PAC Directives ............ 204 AUDIT PARAS ......................................................................................... 205

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22.4.1 Irregularity & non compliance .................................................................. 205 CHAPTER 23 ........................................................................................................... 211 MINISTRY OF SPORTS ......................................................................................... 211 23.1 23.2 23.3 23.4 Introduction of Ministry ............................................................................. 211 Comments on Budget & Accounts (Variance Analysis) ............................. 211 Brief comments on the status of compliance with PAC Directives ............ 213 AUDIT PARAS ......................................................................................... 214

23.4.1 Performance .............................................................................................. 214 23.4.2 Irregularity & non compliance .................................................................. 215 CHAPTER 24 ........................................................................................................... 222 MINISTRY OF TEXTILE INDUSTRY .................................................................. 222 24.1 24.2 24.3 24.4 Introduction of Ministry ............................................................................. 222 Comments on Budget & Accounts (Variance Analysis) ............................. 223 Brief comments on the status of compliance with PAC Directives ............ 224 AUDIT PARAS ......................................................................................... 225

24.4.1 Irregularity & non compliance .................................................................. 225 CHAPTER 25 ........................................................................................................... 226 MINISTRY OF WATER AND POWER ................................................................. 226 25.1 25.2 25.3 25.4 Introduction of Ministry ............................................................................. 226 Comments on Budget & Accounts (Variance Analysis) ............................. 227 Brief comments on the status of compliance with PAC Directives ............ 228 AUDIT PARAS ......................................................................................... 229

25.4.1 Irregularity & non compliance .................................................................. 229 CHAPTER 26 ........................................................................................................... 231 MINISTRY OF WOMEN DEVELOPMENT .......................................................... 231 26.1 26.2 26.3 26.4 Introduction of Ministry ............................................................................. 231 Comments on Budget & Accounts (Variance Analysis) ............................. 232 Brief comments on the status of compliance with PAC Directives ............ 233 AUDIT PARAS ......................................................................................... 234

26.4.1 Irregularity & non compliance .................................................................. 234

vii

Annex-1 Annex-2 Annex-3 Annex-4 Annex-5 Annex-6 Annex-7

MFDAC PARAS ................................................................................... 236 Amount of receipts in 16 contracts ........................................................ 243 Detail of extensions in contracts............................................................ 244 Detail of outstanding dues along with interest accrued ........................ 245 Payment Made to M/s Telenor ............................................................. 247 List of employees promoted ................................................................. 248 Funds collected and expenditure made by IMCs .................................. 249

Annex-7-A Collection of funds by the F.G Colleges .............................................. 249 Annex-8 Annex-9 Loss by accepting low quality printing paper ....................................... 250 Retention of Rs 17.158 million by Women Crises Centers .................. 251

viii

ABBREVIATIONS AND ACRONYMS 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. ADP AEDB AGP AGPR AIOU AIR AJK APPM BECS BOI BoG CDA CDNS CDWP CERS CFAO CGA CIIT CoA CPF CPWA CPWD DA DAC DAGP DCO DDO DDWP DFA DG DGA-FG DMFAS EAD ECNEC ECP EDB EDF Annual Development Programme Alternate Energy Development Board Auditor-General of Pakistan Accountant General Pakistan Revenues Allama Iqbal Open University Audit and Inspection Report Azad Jammu and Kashmir Accounting Policies and Procedures Manual Basic Education Community Schools Board of Investment Board of Governors Capital Development Authority Central Directorate of National Saving Central Development Working Party Computerized Electoral Roll System Chief Finance and Accounts Officer Controller General of Accounts COMSATS Institute of Information Technology Chart of Accounts Contributory Provident Fund Central Public Works Accounts Central Public Works Department Daily Allowance Departmental Accounts Committee Department of the Auditor-General of Pakistan Drug Control Organisation Drawing and Disbursing Officer Departmental Development Working Party Deputy Financial Advisor Director General Directorate General Audit, Federal Government Debt Management and Financial Analysis System Economic Affairs Division Executive Committee of National Economic Council Election Commission of Pakistan Engineering Development Board Export Development Fund

ix

38. 39. 40. 41. 42. 43. 44. 45. 46. 47. 48. 49. 50. 51. 52. 53. 54. 55. 56. 57. 58. 59. 60. 61. 62. 63. 64. 65. 66. 67. 68. 69. 70. 71. 72. 73. 74. 75. 76.

EMDF EPI ETPB FAM FAP FATA FBR FC FCF FD FDE FG FIA FTO FTR GDP GFR GOP GST HEC IB KP KPT LPR MCMC MD MoE MoIT MoST NCA NCHD NADRA NAG NAM NARC NBP NEF NEPRA NGO

Export Market Development Fund Expanded Program for Immunization Evacuee Trust Property Board Financial Audit Manual Foreign Aided Project Federally Administered Tribal Areas Federal Board of Revenue Frontier Constabulary Federal Consolidated Fund Finance Division Federal Directorate of Education Federal Government Federal Investigation Agency Federal Treasury Office Federal Treasury Rules Gross Domestic Product General Financial Rules Government of Pakistan General Sales Tax Higher Education Commission Intelligence Bureau Khyber Pakhtunkhwa Karachi Port Trust Leave Preparatory to Retirement Mid Career Management Course Managing Director Ministry of Education Ministry of Information Technology Ministry of Science and Technology National College of Arts National Commission for Human Development National Database and Registration Authority National Art Gallery New Accounting Model National Agricultural Research Center National Bank of Pakistan National Education Foundation National Electric Power Regulatory Authority Non-Governmental Organization

77. 78. 79. 80. 81. 82. 83. 84. 85. 86. 87. 88. 89. 90. 91. 92. 93. 94. 95. 96. 97. 98. 99. 100. 101. 102. 103. 104. 105. 106. 107. 108. 109. 110. 111. 112. 113. 114. 115.

NH&MP NHA NIH NIM NMC NRSP NTC NTN NSPP O&M OGRA OMC PAC Pak PWD PAL PAO PARC PCCC PC-I PCRWR PCOM PCSIR PCRET PD PEC PDC PID PIMS PKR PLA PNCA PODB PPRA PSB PSDP PPIB PWF RFP RMB

National Highways and Motorways Police National Highway Authority National Institute of Health National Institute of Management National Management College National Rural Support Program National Telecommunication Company National Tax Number National School of Public Policy Operation and Management Oil and Gas Regulatory Authority Oil Marketing Companies Public Accounts Committee Pakistan Public Works Department Pakistan Academy of Letters Principal Accounting Officer Pakistan Agricultural Research Council Pakistan Central Cotton Committee Planning Commission -I Pakistan Council for Research in Water Resources Project Cycle Operation Manual Pakistan Council of Scientific and Industrial Research Pakistan Council for Renewable Energy Technologies Project Director Provincial Election Commission Price Differential Claims Press Information Department Pakistan Institute of Medical Sciences Pakistani Rupees Personal Ledger Account Pakistan National Council of the Arts Pakistan Oil Seed Development Board Public Procurement Regulatory Authority Pakistan Sports Board Public Sector Development Program Private Power and Infrastructure Board Pilgrims Welfare Fund Request for Proposal Renminbi (Official currency of China)

xi

116. 117. 118. 119. 120. 121. 122. 123. 124. 125. 126. 127. 128. 129. 130. 131. 132. 133. 134. 135. 136. 137.

Rs SAF SAP SBP SOP STR SMC TA TDAP TDRs TO TOR TROSS UK USA USD V & FMS VC WAPDA WB WFP WTO

Rupees (Pakistan) South Asian Federation System Application Product State Bank of Pakistan Standard Operating Procedure Scientific & Technological Research Senior Management Course Travelling Allowance Trade Development Authority of Pakistan Term Deposit Receipts Treasury Officer Terms of Reference Teachers Researchers Overseas Scholarship Scheme United Kingdom United States of America United States Dollar Veterinary & Farms Managements Sub-Division Vice Chancellor Water and Power Development Authority World Bank World Food Programme World Trade Organization

xii

Preface

Articles 169 and 170 of the Constitution of Islamic Republic of Pakistan 1973 read with Sections 8 and 12 of the Auditor-Generals (Functions, Powers, Terms and Conditions of Service) Ordinance 2001, require the Auditor-General of Pakistan to conduct audit of receipts to and expenditure from the Federal Consolidated Fund and Public Account. The report is based on audit of expenditure and receipts for the financial year 2009-10 in respect of federal government organizations. The Directorate General Audit (Federal Government), Islamabad conducted audit during audit year 2010-11 on a test check basis with a view to reporting significant findings to stakeholders. Audit findings indicate the need for adherence to the regularity framework besides instituting and strengthening internal controls to avoid recurrence of similar violations and irregularities. Most of the observations included in this report have been finalized in the light of discussion in the DAC meetings. The Audit Report is submitted to the President of Pakistan in pursuance of Article 171 of the Constitution of the Islamic Republic of Pakistan 1973, for causing it to be laid before both Houses of Majlis-e-Shoora [Parliament].

Dated: 28 February 2011

TANWIR ALI AGHA Auditor-General of Pakistan

xiii

EXECUTIVE SUMMARY The Federal Government conducts its operations under the Rules of Business 1973 and comprises 71 Principal Accounting Officers (PAOs) for different Ministries, Divisions, Attached Departments, Subordinate Offices and certain Autonomous Bodies. Financial provisions of the Constitution lay down the due process for both raising of receipts and authorization of expenditure from the Federal Consolidated Fund and the Public Account. a. Expenditure audited Out of total expenditure of the Federal Government for the Financial Year 2009-10, auditable expenditure under the jurisdiction of Directorate General Audit, Federal Government (DGA-FG) was Rs 634.66 billion covering 69 PAOs and 2,869 formations. The DGA-FG audited an expenditure of Rs 410.53 billion which, in terms of percentage, is 65% of auditable expenditure. In addition, DGA-FG has also undertaken 8 project audits, 6 performance audits, 8 special audits, 3 environmental audits and 31 Foreign Aided Projects (FAP) audits. Reports of these audits will be published separately. b. Recoveries at the instance of audit Recovery of Rs 1,169.97 million was verified as effected during year 2010-11 up to January 2011 on the pointation of Audit. c. Desk audit The audit year 2010-11 witnessed intensive application of desk audit techniques in the DGA-FG. This was facilitated by access to live SAP/R3 data, intranet, internet facility, and availability of permanent files. Desk review helped auditors in understanding the systems, procedures, environment, and the audited entity before starting field activity. This greatly facilitated in the identification of high risk areas for substantive testing in the field. d. Changes in rules, practices and systems i. The issue of audit of Regimental/Command Fund has been pursued by this Directorate General during the audit year 2010-11. Presently the Civil Armed Forces (CAFs) are formulating the rules concerning Regimental/Command Fund

on the pattern of armed forces. The audit of Regimental/Command fund of CAFs will be taken up once these rules are approved by the Ministry of Finance. ii. As a consequence of highlighting the issue of weak internal controls in the Federal Directorate of Education (FDE), the FDE has recently taken up the internal audit/internal checks of all Federal Government educational institutions in Islamabad. During the current year this office objected to the un-authorized payment made by the Ministry of Law, Justice and Parliamentary Affairs to 110 Bar Associations across the country. Consequently the Ministry has taken up a case for amendment in the Legal Practitioners and Bar Councils Act, 1973 (XXXV of 1973) whereby the Federal Government in the case of Pakistan Bar Council or a Bar Association and the Provincial Government, in the case of Provincial Bar Council or a Bar Association, will be able to give grants in aid to the Bar Councils as well as to the Bar Associations. The audit observation is presently placed at Annex-1, since record recently provided to Audit is under verification and other relevant record is yet to be provided. Audit will also monitor progress on the amendments in the legislation. Further action will be taken by Audit in the light of this progress, the outcome of verification process and provision of complete record to Audit. While conducting the audit of Prime Ministers Secretariat, this office had raised the issue of serving breakfast, lunch, dinner and tea to the employees working in the Secretariat. An expenditure of Rs 10.48 million was incurred from the head of account ID-0028-Presents and Charities meant for the purchase of presents and distribution of different items or amount in cash to the poor and needy persons. As a corrective measure the Prime Ministers Secretariat with the approval of Finance Division has opened a new Head of Account namely A-03963-Feeding/Diet/Food Charges for expenditure being incurred on provision of lunch, dinner and tea. In addition to the audit reports finalized under the approved Audit Plan, the Directorate General Audit (Federal Government) also undertook a special assignment on review of implementation of budgetary Austerity Measures at the behest of the Federal Cabinet. Another special exercise on checking misuse of official vehicles was undertaken at the instance of the Federal Public Accounts Committee.

iii.

iv.

v.

e. Key audit findings of the report i. ii. iii. iv. v. vi. There were 11 cases of embezzlement of public money and fictitious / fudged payments amounting to Rs 2,407.72 million1. There were 27 cases of irregular expenditure / payments and violation of rules amounting to Rs 6,908.60 million.2 There were 25 cases of recovery amounting to Rs 1,519.27 million3. There were 3 instances of irregularities pertaining to non production of record amounting to Rs 1,356.94 million4 There were 17 cases of weak internal controls amounting to Rs 9,538.24 million.5 There were 38 cases pertaining to weak financial management amounting to Rs 11,949.64 million and 6 cases related to unsound asset management amounting to Rs 1,342.55 million.6

Audit paras for the audit year 2010 - 2011 involving procedural violations including internal control weaknesses and irregularities which are not considered significant for reporting to PAC or are still being developed, are included in Annex-1. f. i. Recommendations Ministries/Divisions need to strictly follow Article 78 of Constitution in handling public money whether they receive or spend it. They should deposit/retain the public money in the Federal Consolidated Fund and Public Accounts as the case may be. Strict action may be taken to stop the practice of Ministries/Divisions or their autonomous bodies/authorities investing public money in commercial banks in violation of the prescribed rules. PAOs need to ensure that records are produced to Audit in a timely manner. Action should be taken under the law, against officials who deny such access.

ii.

Para 4.4.1.1, 6.4.2.1, 6.4.2.2, 6.4.3.9, 9.4.1.1, 9.4.2.3, 10.4.1.1, 17.4.1.1, 20.4.1.1, 21.4.2.1, 21.4.2.3 2 Para 2.4.2.1, 4.4.2.6, 6.4.3.1-3, 6.4.3.7-8, 6.4.3.10-11, 8.4.1.1, 9.4.2.1, 11.4.2.1, 13.4.2.1, 13.4.4.1, 14.4.2.1, 15.4.1.1, 16.4.1.2, 17.4.3.1, 17.4.3.3, 17.4.4.1, 19.4.1.3, 22.4.1.5, 23.4.2.3, 23.4.2.4, 23.4.2.5, 25.4.1.1, 26.4.1.1 3 Para 3.4.1.1, 4.4.2.1, 4.4.2.2-3, 6.4.3.4, 6.4.3.6, 6.4.3.8, 7.4.1.3, 9.4.2.2, 11.4.2.7, 12.4.2.1, 13.4.3.1-2, 14.4.1.1, 14.4.2.2, 16.4.1.1, 17.4.4.3, 19.4.1.2, 20.4.1.2, 22.4.1.2, 23.4.1.1, 23.4.1.3, 24.4.2.2, 24.4.2.6, 25.4.1.1 4 Para 2.4.2.5, 17.4.2.1, 23.4.1.2 5 Para 1.4.2.1, 2.4.2.2, 2.4.2.4, 2.4.2.6, 3.4.2.1, 6.4.3.12, 8.4.1.2, 11.4.2.4, 11.4.2.6, 15.4.1.2, 17.4.3.2, 17.4.4.2, 18.4.1.1, 20.4.2.2, 21.4.1.1, 22.4.1.4, 23.4.1.1 6 Para 10.4.2.1, 11.4.1.2, 20.4.2.1, 22.4.1.4, 23.4.2.2, 24.4.2.5

iii.

iv. v.

vi. vii. viii.

Instances of the Ministries/Departments/ or their autonomous bodies / authorities making payments to employees in contravention of rules and in disregard of the employees entitlement need to be checked by effecting recoveries where due and taking disciplinary action against the officials involved in granting extra perks and privileges. Ministries/Divisions need to comply with the Public Procurement Rules 2004 for procurement of goods and services. Ministries/Divisions need to strengthen internal controls to ensure that lapses of the kind reported in this report are preempted and fair value for money is obtained from public spending. Reconciliation of expenditure needs to be carried out regularly. Unspent balances need to be deposited into government treasury. Inquiries need to be held to fix responsibility for losses and wasteful expenditure.

AUDIT OBJECTIVE, SCOPE AND METHODOLOGY

I.

Audit Objective

To obtain assurance that adequate controls exist in key business processes for payments, procurements, receipts, recoveries and compliance with rules to ensure that the controls have remained operational throughout the period under review at all significant locations.

II.

Audit Scope

The audit was conducted in accordance with INTOSAI Auditing Standards as envisaged in Financial Audit Manual, Guidelines for the Audit of Federal Government Operations and International Standards on Auditing. The overall audit scope was to assess compliance with financial rules and adequacy of internal controls over expenditure, safeguarding of assets and receipts. Audit also assessed the following: i. Financial accountability of entities, involving examination and evaluation of financial records Financial accountability of the government administration as a whole Financial systems and transactions including an evaluation of compliance with applicable statues and regulations Audit of internal control and internal audit functions Audit of the probity and propriety of administrative decisions taken within the audit entity Reporting of any other matters arising from or relating to the audit that the Supreme Audit Institution considers should be disclosed. Audit Methodology

ii. iii.

iv. v.

vi.

III.

Audit was performed to ensure completeness, accuracy, relevance and genuineness of expenditure incurred by the Federal Government. Desk review was undertaken in gaining understanding the systems, procedures, control environment of entity audited before starting field activity. Audit tests were performed to evaluate that the expenditures were

completely recorded, receipts were timely deposited into Government treasury, procurements were made in accordance with Public Procurement Rules, 2004 and the expenditures were recorded as per proper classification. Audit conducted a review of payments to ensure that these were validated by proper supporting documents and approval of management as per applicable rules and regulations and that record was properly maintained and up to date. Budget comparison with actual expenditures was made to confirm that expenditures were incurred in accordance with the approved budget including the revisions made therein. The audit teams maintained professional skepticism throughout the audit recognizing the possibility that a material misstatement could exist.

SUMMARY TABLES & CHARTS

I. Table 1
Sr. No. 1 2 3 4 5 6 7 8

Audit Work Statistics (Rs in million)

Description Total Entities (Ministries / PAOs) in Audit Jurisdiction Total Formations in Audit Jurisdiction Total Entities (Ministries / PAOs) Audited Total Formations Audited Audit & Inspection Reports Special Audit Reports Performance Audit Reports Other Reports* No. 69 2869 35 437 437 8 6 8 PSDP Audits 31 FAP Audits 5 Certification Audits 3 Environmental Audits Budget 634,664 634,664 482,970 410,527 410,527

37,645 3,780

* These Reports are in addition to the above Reports which are a part of our Audit Plan II. Table 2
Sr. No. 1 2 3 4 Description Unsound asset management Weak financial management Weak internal controls relating to financial management Others Total

Audit Observations classified by Categories (Rs in million)

Amount Placed under Audit Observation 1,342.55 11,949.64 2,816.71 9,623.14 25,732.04

III. Table 3
Sr. No

Outcome Statistics (Rs in million)

Expenditure on Acquiring Physical Assets Procurement 9,163 2,870.50 Civil Works Receipts Others Total Current Year Total Last Year

Description

1 2

Outlays Audited Amount placed under audit observation Recoveries pointed out at the instance of audit Recoveries accepted / established at the instance of audit Recoveries realized at the instance of audit

6,162.76 2,325.59

6,503.85 461,143.51 3,424.57 17,111.37

482,973.12 * 25,732.04 **

689,671 116,029

11.26

3.12

52.54

1,452.35

1,519.27 ***

24,255.21

11.26

3.12

52.54

1,452.35

1,519.27 ****

24,255.21

1,169.97 *****

470.741

* ** *** **** *****

This figure pertains to budget estimate for the financial year 2009-10 This figure includes observations pertaining to previous financial years, non budgetary expenditure of various entities and receipts. This figure pertains to recoveries pointed out in the subject audit report. This figure pertains to recoveries accepted/established in the subject audit report This figure pertains to recoveries made (at the instance of audit), as a consequence of PAC/DAC directives from March 2010 to January 2011.

IV. Table 4
Sr. No. 1 2 3

Irregularities pointed out (Rs in million)

Description Violation of rules and regulations and violation of principal of propriety and probity in public operations. Reported cases of fraud, embezzlement, thefts and misuse of public resources. Accounting Errors (accounting policy departure from NAM, misclassification, over or understatement of account balances) that are significant but are not material enough to result in the qualification of audit opinions on the financial statement. If possible quantify weaknesses of internal control systems. Recoveries and overpayments, representing cases of establishment overpayment or misappropriations of public monies. Non-Production of record. Others, including cases of accidents, negligence etc. Amount Placed under Audit Observation 6,908.60 2,407.72 -

4 5

9,538.24 1,519.27

6 7

1,356.94 412.60

CHAPTER 1

1 1.1

CABINET DIVISION Introduction of Division

The Cabinet Division is responsible for the conduct of business of the Federal Government in a distinct and specified sphere. The Cabinet Division has been assigned different functions as per the Rules of Business 1973, which include: Setting up of an administrative division, allocation of business to a division and constitution of a division or group of divisions as a Ministry Implementation of the directives of the President/Prime Minister Administrative control and review of the operations of different attached departments and independent regulatory authorities

The Cabinet Secretary heads the Cabinet Division under the Prime Minister as the Minister In-charge. The business is subdivided as under:

Cabinet, Ministerial and Administration (CMA) Economic Committees and Regulatory Authorities (EC&R) Communications Security and Military (CS&M)

Some of the important tasks of the Cabinet Division are to:

Conduct meetings of the Cabinet Monitoring implementation of Cabinet decisions Secretarial assistance to Secretaries Committee Amend and interpret Rules of Business 1973 Administrative control of Shaikh Zayed Post Graduate Medical Complex Work relating to Pakistan Intellectual Property Rights Organization Relief assistance to the provinces in cases of major disasters Implementation of directives issued by the President and the Prime Minister Acquisition and preservation of state documents Assist the Defense Committee of the Cabinet in coordination of the war effort at national level Affairs of the Central Pool of Cars at the Federal Government Formulation and implementation of staff car rules Intelligence Bureau (IB) affairs

10

Cabinet Division has a Committee Wing, which provides secretarial assistance to the following Committees and any other ad-hoc committee constituted under the rules

National Economic Council (NEC) Executive Committee of the National Economic Council (ECNEC) Economic Coordination Committee (ECC) Cabinet Committee on Privatization (CCOP) Cabinet Committee on Investment (CCOI) Social Sector Coordination Committee (SSCC) Cabinet Committee on Agriculture (CCA) Cabinet Committee on Regulatory Bodies (CCRB) Cabinet Committee on Energy (CCE) Cabinet Committee on Earthquake, Relief, Reconstruction and Rehabilitation

Regulatory wing of Cabinet Division has administrative control of the following regulatory authorities and autonomous entities

National Electric Power Regulatory Authority (NEPRA) Oil and Gas Regulatory Authority (OGRA) Public Procurement Regulatory Authority (PPRA) National Commission for Human Development (NCHD) Comments on Budget & Accounts (Variance Analysis)

1.2

Grant wise detail of current and development expenditure of Cabinet Division is mentioned below: (Figures in Rupees)
Grant Grant Type No 1 2 3 4 13 134 135 Current Current Current Current Current Subtotal Development Development Subtotal Total Original Grant 161,664,000 1,628,301,000 2,933,453,000 3,274,286,000 47,899,000 8,045,603,000 29,918,865,000 70,000,000,000 99,918,865,000 107,964,468,000 Supplementary Grant 44,973,000 2,824,938,000 531,097,000 576,729,000 3,977,737,000 2,606,710,000 2,606,710,000 6,584,447,000 Final Grant 206,637,000 4,453,239,000 3,464,550,000 3,851,015,000 47,899,000 12,023,340,000 32,525,575,000 70,000,000,000 102,525,575,000 114,548,915,000 Expenditure 203,861,415 4,151,620,662 3,292,130,222 4,025,714,006 42,025,278 11,715,351,583 29,671,533,528 40,271,108,672 69,942,642,200 81,657,993,783 Excess / (Saving) (2,775,585) (301,618,338) (172,419,778) 174,699,006 (5,873,722) (307,988,417) (2,854,041,472) (29,728,891,328) (32,582,932,800) (32,890,921,217) %age Excess/ (Saving) (1.34) (6.77) (4.98) 4.54 (12.26) (2.56) (8.77) (42.47) (31.78) (28.71)

11

Audit noted that: In Grant 2, there was a saving of Rs 301.618 million which was 6.77 percent of the original grant. Supplementary grants of Rs 2,824.938 million were 173.5 percent of original grant. In Grant 135, the saving of Rs 29,728.89 million was 47.47 percent of the Original Grant. This was due to the savings in Benazir Income Support Program.

Supplementary grants obtained without careful cash forecasting In order to ensure prudent financial management, Para 13(vii) of System of Financial Control and Budgeting, 2006 states that Ministries / Divisions should be able to anticipate budgetary requirements well ahead of the financial year to which the budget relates and obtain the concurrence of the Finance Division. The Finance Division is expected to decline any request for supplementary grants except in extraordinary circumstances. This document further states that the funds obtained from supplementary grants shall be expended for the purposes for which these have been sanctioned. In current expenditure, demands for supplementary grants shall not be made, except in extraordinary circumstances. During the year, supplementary grants of Rs 6,584.447 million were obtained which were 6% of original allocation. According to Para 71 of General Financial Rules (Volume I), while framing budget estimates, the authorities should exercise utmost foresight. Variation between estimated and actual expenditure captures the level of foresight that goes into budget formulation. As shown in the graph below, the excess in current expenditure was 45.61%, which, after accounting for supplementary grants changed to savings of 2.56%. In development expenditure, savings against original budget was 30% which changed to 31.78% when supplementary grants were taken into account.

12

1.3

Brief comments on the status of compliance with PAC Directives

Years Total No Of Paras Compliance Non-Complied % of compliance 0 0 0 1987-88 1 1 0 100% 1988-89 0 0 0 1989-90 0 0 0 1990-91 0 0 0 1991-92 6 2 4 33% 1992-93 9 9 0 100% 1993-94 3 1 2 33% 1994-95 4 3 1 75% 1995-96 8 3 5 38% 1996-97 32 9 23 28% 1997-98 0 0 0 1999-00 52 5 47 10% 2000-01 0 0 0 2001-02 1 0 1 0% 2006-07 5 0 5 0% 2008-09 Note: The report for the audit years 1998-99, 2002 2006, 2007-08 have not been discussed in the Public Accounts Committee (PAC)

13

1.4 1.4.1 1.4.1.1

AUDIT PARAS Non production of record Non-production of record of 67 vehicles - Rs 18.435 million

According to section 14 of Auditor-General's (Functions, Powers and Terms and Conditions of Service) Ordinance, 2001, the Auditor-General shall, in connection with the performance of his duties under this Ordinance, have authority to require that any accounts, books, papers and other documents which deal with, or form, the basis of or otherwise relevant to the transactions to which his duties in respect of audit extend, shall be sent to such place as he may direct for his inspection. Contrary to the above provision, office of the Joint Director General, Intelligence Bureau, Punjab, Lahore, under the administrative control of Cabinet Division, did not produce the record of 67 government vehicles to the Audit. The record involved expenditure of Rs 18,435,552 on POL and maintenance of vehicles. This record was also not produced in Audit Year 2008-09. In the absence of record, the propriety and probity of expenditure could not be ascertained. The non-presentation of record may create doubts as to the actual existence of any such record at all, which may make the public money vulnerable to misuse. No reply was received till finalization of this audit report. The DAC meeting was not convened by the PAO till the time of finalization of this audit report. Audit recommends that responsibility be fixed, disciplinary action be initiated against officials responsible for this lapse under relevant Efficiency and Discipline Rules as required under section 14(3) of Auditor-General's (Functions, Powers and Terms and Conditions of Service) Ordinance, 2001 and record be provided to Audit for review. 1.4.2 1.4.2.1 Irregularity & non compliance Unauthorized expenditure on unapproved allowances - Rs 10.09 million

As per para 25 of General Financial Rules Vol-1, all departmental regulations involving financial character or have important financial bearing should be made by or with the approval of Ministry of Finance.

14

Sheikh Zayed Post Graduate Medical Institutes Employees (Service) Regulation 1990, Chapter- 2 at Sr. 2 provides that the employees of the Institute shall be entitled to such allowances as are admissible from time to time to the corresponding categories of employees of Federal Government. Moreover, the basic pay scales prescribed by Federal Government shall be applicable to the employees of the institute. Furthermore, no authority should exercise its powers of sanctioning expenditure to pass an order which will be indirectly or directly to its own advantage. Contrary to the above rules, Sheikh Zayed Post Graduate Medical Institute, Lahore, under the administrative control of Cabinet Division, incurred an expenditure of Rs 10.092 million on the payment of Incentive Allowance and Anesthesia Allowance to Professors/Associate Professors, Demonstrators of Basic Health Science, Anesthesia and ICU Department on the following rates: 1. Incentive Allowance i. Professor ii. Associate Professor iii. Assistant Professor iv. Demonstrator 2. Anesthesia Allowance i. ii. iii. iv. v. vi. Professor Associate Prof. Anesthetist Assistant Prof. Anesthetist Medical Officer BPS-20 BPS-19 BPS-18 BPS-17 Rs 30,000 (per month) Rs 20,000 (per month) Rs 15,000 (per month) Rs 5,000 (per month)

BPS-20 BPS-19 BPS-19 BPS-18 BPS-18 BPS-17

Rs 25,000 (per month) Rs 20,000 (per month) Rs 20,000 (per month) Rs 15,000 (per month) Rs 15,000 (per month) Rs 10,000 (per month)

As per the record provided, the Incentive Allowance to the faculty of Basic Health Science Department was approved by the Board of Governors (BoG) on 5 th May, 2007. Similarly Anesthesia Allowance to the lecturers of Anesthesia and ICU Department of the Hospital Institute was approved by the Chairman and Dean on 18.8.2008. Audit maintains that under the quoted rules, a new allowance could only be created with the approval of the Finance Division. Thus, the payment on account of the Incentive Allowance and Anesthesia Allowance is without lawful authority.

15

This observation has repeatedly been reported by the Audit in previous years to the management. However, this practice has not been discontinued. Audit holds that the payment of unauthorized allowance has put an extra burden on the exchequer. No reply was received till finalization of this report. The DAC meeting was not convened by the PAO till the time of finalization of this audit report. Audit recommends that the above mentioned payment against these allowances need to be discontinued immediately and the unauthorized payments be recovered and deposited in government treasury. Furthermore, responsibility be fixed on the official(s) responsible for this lapse.

16

CHAPTER 2

2 2.1

MINISTRY OF COMMERCE Introduction of Ministry

The Ministry of Commerce is responsible for matters concerning trade policy of the country and coordination with various trade organizations of different countries. The core operational activities of the Ministry include: To define trade policy for the country To provide liaison among various chambers of commerce To coordinate with various trade organizations of different countries and provide one window operation to them

There are different attached departments and sub-divisions that assist the division in performing its functions. These are: Trade Development Authority of Pakistan Trading Corporation of Pakistan National Tariff Commission State Life Insurance Corporation Foreign Trade Institute of Pakistan Pakistan Reinsurance Company National Insurance Company Pakistan Tobacco Board Federation of Chambers and Industry Pakistan Horticulture Development and Export Board

17

2.2

Comments on Budget & Accounts (Variance Analysis)

Grant wise detail of current and development expenditure of Commerce Division is mentioned below: (Figures in Rupees) %age Grant Supplementary Grant Type Original Grant Final Grant Expenditure Excess / (Saving) Excess/ No Grant (Saving) 14 Current 4,540,790,000 1,857,000 4,542,647,000 2,900,795,828 (1,641,851,172) (36.14) 138 Development 839,167,000 40,001,000 879,168,000 659,604,324 (219,563,676) (24.97) Total 5,379,957,000 41,858,000 5,421,815,000 3,560,400,152 (1,861,414,848) (34.33) Audit noted that: There was an overall saving of 34.33% amounting to Rs 1,861.41 million, which was mainly due to savings in current grant of Rs 1,641.85 million. Saving amounting to Rs 1,641.85 million in current grant mainly occurred in the object of Grant, subsidies and write off loans under the function Administration. Supplementary grants obtained without careful cash forecasting In order to ensure prudent financial management, Para 13(vii) of System of Financial Control and Budgeting, 2006 states that Ministries / Divisions should be able to anticipate budgetary requirements well ahead of the financial year to which the budget relates and obtain the concurrence of the Finance Division. The Finance Division is expected to decline any request for supplementary grants except in extraordinary circumstances. This document further states that the funds obtained from supplementary grants shall be expended for the purposes for which these have been sanctioned. In current expenditure, demands for supplementary grants shall not be made, except in extraordinary circumstances. During the year, supplementary grants of Rs 1.857 million were obtained which was 0.4% of original allocation. According to Para 71 of General Financial Rules (Volume I), while framing budget estimates, the authorities should exercise utmost foresight. Variation between estimated and actual expenditure captures the level of foresight that goes into budget formulation. As shown in the graph below, the saving in current expenditure was 36.12%, which, after accounting for supplementary grants changed to savings of 36.14%. In development expenditure, savings against original budget was 21.4% which changed to 24.97% when supplementary grants were taken into account.

18

2.3

Brief comments on the status of compliance with PAC Directives

Years Total No Of Paras Compliance Non-Complied % of compliance 3 2 1 67% 1987-88 1 0 1 0% 1988-89 3 1 2 33% 1989-90 6 2 4 33% 1990-91 1 1 0 100% 1991-92 3 3 0 100% 1992-93 4 4 0 100% 1993-94 1 0 1 0% 1994-95 3 0 3 0% 1995-96 12 5 7 42% 1996-97 69 0 69 0% 1997-98 0 0 0 1999-00 0 0 0 2000-01 10 0 10 0% 2001-02 1 0 1 0% 2006-07 8 0 8 0% 2008-09 Note: The report for the audit years 1998-99, 2002 2006, 2007-08 have not been discussed in the Public Accounts Committee (PAC)

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2.4 2.4.1

AUDIT PARAS Non production of record Non production of record of payment to trade organizations / delegations Rs 55.87 million

2.4.1.1

In terms of Rule 4 (i) (b) of Export Market Development Fund (EMDF) Rules & Forms, the funds available in the EMDF can be utilized to conduct market surveys of one or more products undertaken with the approval of the management of the Fund at the request of a recognized trade organization. This activity can be financed from the Fund up to 50 % of total expenditure. As regards exhibitions, expenditure on this account can be incurred as per the provisions of rule 4 (v) of EMDF Rules & Forms, according to which expenses on rent, decoration, carriage and freight charges of stalls and exhibitions in respect of only such exhibitions where the participation is official can be met from the Fund. Audit noted that during the period 2009-10, the management of Trade Development Authority of Pakistan (TDAP) paid a sum of Rs 55.867 million from the EMDF account to various trade organizations on account of 50% financing of organizational expenses of fairs & exhibitions. In some cases 100% payment was made to women entrepreneur. Audit observed that the payment was not made against bills/account in accordance with rule 4 (v) of the EMDF Resolution. Due to non-availability of bills/account, it could not be ascertained as to whether the amount paid by EMDF was 50% of the expenditure or not. Audit also observed that neither the participation report, as required under Para 6.3 (a, b), nor response of foreign buyers were available on record. Further, TDAP did not carry out any due diligence at the time of selection of the trade organizations as some participants applied for asylum after participation in an exhibition in Canada. In view of the observations stated in the preceding paragraphs, the accuracy and authenticity of the payment of Rs. 55.867 million could not be ascertained. The management replied that all rules and regulations were followed in the subject case and the record would be provided for verification. Audit did not find the response satisfactory as it had not provided record.

20

The DAC meeting was held on 25-01-2011, where the Principal Accounting Officer advised the management to provided record to Audit for review within two weeks. However, no record was produced till the finalization of this Report. Audit recommends that complete record be provided to Audit for review.

2.4.2 2.4.2.1

Irregularity & non compliance Release of Rs 1.13 billion to the missions abroad without realization of benefits from the public money and non refund of unspent balances

Para 10 (2) of GFR Vol-I stipulates that the expenditure should not be prima facie more than the occasion demands. The Trade Development Authority of Pakistan (TDAP), as a standard practice, remits amount from the Export Market Development Fund (EMDF) to various Pakistani missions abroad without any demand from them. In line with this practice, an amount of Rs 358.120 million in 2007-08, Rs 406.427 million in 2008-09 and Rs 362.149 million in 2009-10 was remitted abroad. Audit noted that there was no adjustment account received against these remittances, even after the close of fiscal years. As per record, TDAP never even reminded the missions abroad for rendering the adjustment account and/or surrendering the unspent balances. During the review of record, Audit noted some instances of unspent balances lying in the accounts of missions abroad at the end of November 2010 as detailed under:
Name of Embassy / Mission Germany (Frankfurt) Sweden (Stockholm) United States (L.A) United States (Houston) Japan (Tokyo) Amount Euro 742,226 SEK 2,881,288 US $ 373,135 US $ 38,059 Yen 1,308,614 Name of Embassy / Mission Mexico Syria (Damascus) Morocco (Rabat) France (Paris) Canada (Montral) Amount US $ US $ US $ Euro CAN $ 58,335 20,877 25,077 49,485 38,361

Audit further noted that the Chief Executive, TDAP, accorded sanction for the remittances, while his competency was limited to Rs 10 million. Further, TDAP did not carry out any internal audit of the remittances.

21

On demand, the management could not provide any evidence on benefits derived from the payments remitted to the missions abroad. Audit maintains that the non-reconciliation and non-surrender of unspent balance has made the public fund vulnerable to misuse. Further, due to absence of internal audit, the scope for misappropriation cannot be ruled out. In response to the observation, the management replied that all rules and regulations were followed in the subject case and the record would be provided to Audit for verification. The DAC meeting was held on 25-01-2011, which advised the management to provide adjustment account to Audit and reconcile monthly expenditure statements with releases from TDAP. Audit recommends that (a) the decision of DAC be implemented under intimation to Audit and (b) in future the amount only be remitted against demand with the instructions that the adjustment account be furnished to EMDF for the purpose of audit, (c) missions abroad be advised to submit report on actual benefit realized from the funds received from EMDF (d) refund the unspent amount, (e) and arrangements be made for internal audit of TDAP, in respect of remittances to missions abroad, on regular basis.

2.4.2.2

Irregular expenditure on visit abroad- Rs 5.22 million

In terms of Para 12 of GFR Vol-I, a Controlling Officer must see not only that the total expenditure is kept within the limits of authorized appropriation but also that the funds allotted to spending units are expended in the public interest and upon objects for which the money was provided. Rule 6 of Export Market Development Fund (EMDF) states that if any expenditure is to be incurred on any promotional measure which is outside the scope of these Rules, prior sanction of the Government will be obtained to such expenditure. Audit noted that the management of the Trade Development Authority of Pakistan (TDAP) met an expenditure of Rs 5,224,006 on account of visits of Minister for Commerce to six countries, during 2009-10, from the Export Market Development Fund (EMDF). Audit holds that this was not a valid charge on the EMDF and the expenditure should have been met from the budget of the Cabinet Division.

22

Audit also observed that prior permission of the Prime Minister, Ministry of Finance and Ministry of Foreign Affairs for visits abroad, as required under the rules, was not obtained. Audit maintains that this was misuse of public funds. The management replied that all rules and regulations were followed in the subject case and the record would be provided for verification. Audit did not find the reply satisfactory as the management had not justified charging of subject expenditure to EMDF. Further, the response was not accompanied by any evidence. The DAC meeting was held on 25-01-2011, whereby the management was advised that payments, which did not constitute a valid charge on the EMDF, be stopped immediately. Audit recommends that the decision of DAC be implemented under intimation to Audit. Further, the amount in question be regularized from Finance Division.

2.4.2.3

Loss of Rs 67.50 million due to non-collection of Withholding Tax from auctioneers of textile quota

In terms of Section 50 (7A) of the Repealed Income Tax Ordinance, 1979, the defunct Export Promotion Bureau (EPB) was required to withhold tax @ 3% on the auctioned price. While reviewing the record of Trade Development Authority of Pakistan (TDAP), Audit noted that the defunct EPB (predecessor organization of TDAP) earned Rs 2.25 billion from auction of textile quota during the financial years 1996-97 and 1997-98. EPB failed to collect Income Tax @ 3%, amounting to Rs 67.50 million, from those who purchased the textile quota. Since this was in violation of the provisions of Income Tax Ordinance, 1979, the tax authorities recovered the amount of tax from TDAPs bank account in two installments, under notice, as detailed below: Sr. No. 1 2 Date of Income Tax Recovered 30-06-2000 31-12-2008 Total Amount Rs in million 33.75 33.75 67.50

23

Audit maintains that the non-collection of tax from the buyers/exporters and its subsequent payment from the TDAPs funds caused a loss of Rs 67.50 million to the public exchequer. The DAC meeting was held on 25-01-2011, whereby the Principal Accounting Officer advised that the matter needs to be investigated, responsibility be fixed on the person(s) responsible for non-deduction of Income Tax at source. Audit recommends that the decision of DAC be implemented. Further, the complete list of exporters, who purchased the textile quota during the period 1996-98, be provided to Audit. 2.4.2.4 Contract agreement for consulting services of Rs 58.79 million and infructuous expenditure of Rs 22.92 million

Rule 4 of Public Procurement Rules 2004 states that procuring agencies, while engaging in procurements, shall ensure that the procurements are conducted in a fair and transparent manner, the object of procurement brings value for money to the agency and the procurement process is efficient and economical. Rule 12 (2) of Public Procurement Rules 2004 envisages All procurement opportunities over two million rupees should be advertised on the Authoritys website as well as in other print media or newspapers having wide circulation. The Trade Development Authority of Pakistan (TDAP), Karachi signed an agreement with a firm, on 26.05.2007, to provide consulting services for organizational development. The contract valued Rs 58.79 million with a completion period of 24 months. Audit noted the following irregularities in this contract: i) The opportunity was not advertised at the website of the Public Procurement Regulatory Authority (PPRA), which was irregular and violation of Public Procurement Rules 2004. ii) The stipulated completion time of contract was 24 months however the assignment could not be completed till November 2010. iii) A payment of Rs 22,921,500 (39% of contract) was made to consultant. However, the reports submitted by the consultant in June-July 2008 were not approved, by the TDAP, owing to quality issues. There has been no further progress on deliverables from the Consultant.

24

iv) The performance security @ 10% of the contract amount expired on 11.08.2009 but TDAP did not make any request to the consultant for its renewal. Audit maintains that owing to the above irregularities, the effectiveness of the assignment and usefulness of payment made from the public exchequer has become questionable. In response, the management replied that all rules and regulations were followed in the subject case and the record would be provided to Audit for verification. The DAC meeting was held on 25-01-2011, whereby the Principal Accounting Officer advised that the record be provided to Audit within two weeks for verification. Audit recommends that the consultant be advised for renewing the performance security. The matter be got investigated and responsibility be fixed for the lapses reported in the observation.

2.4.2.5

Non-availability of adjustment account pertaining to event management firm - US $ 2.834 million

Under rule 50 of the Public Procurement Rules, 2004, any unauthorized breach of these rules shall amount to mis-procurement. The Trade Development Authority of Pakistan (TDAP), Karachi concluded an agreement with a firm, for a sum of US $ 2.834 million on 12.01.2009. Under the contract, TDAP appointed the firm as Event Manager for World Expo China 2010 held on MayOctober 2010 at Shanghai, China. Audit observed the following irregularities in the subject contract: i) The contract was awarded to the firm without advertising the opportunity on the website of the Public Procurement Regulatory Authority and in the print media in violation of rule 12 of Public Procurement Rules 2004. As per terms and conditions of the contract, 15% mobilization advance, amounting to US $ 425,175 was paid to the firm. However, no bank guarantee was obtained in violation of rules. As per clause 12.1 of the contract, the payments were to be released upon receipt of invoice(s) from the firm. Contrary to this provision, the entire amount was released in four installments during March-August 2009. No invoice(s) and receipt were found in the record.

ii)

iii)

25

iv)

As per clause 12.1 of the contract, the firm was required to invest at least US $ 2,094,500 from its own resources and the firm was under obligation to provide documentary proof about this investment to TDAP. No such documentary evidence to this effect was available in record.

Audit, in view of the above mentioned irregularities, considers the award of contract as mis-procurement. In response to the observation, the management replied that all rules and regulations were followed in the subject case and the record would be provided for verification. Audit maintains that by not complying with the Public Procurement Rules 2004, the management has deprived the exchequer of the benefit of competitive bidding. Further, the observation is indicative of internal control weaknesses in the organization, which have made the public fund vulnerable to misuse. The DAC meeting was held on 25-01-2011, whereby the Principal Accounting Officer advised the management that the record be provided to Audit within two weeks for verification. Audit recommends that the decision of DAC be implemented under intimation to Audit. The matter be investigated and responsibility be fixed for the lapses reported in the observation.

2.4.2.6

Irregular and unjustified expenditure of Rs 6.120 million on account of rent of TDAP guest house

According to Para 10 of GFR Vol-1, every officer incurring or authorizing expenditure from public funds should be guided by high standards of financial propriety and every public officer is expected to exercise the same vigilance in respect of expenditure incurred from public moneys as a person of ordinary prudence would exercise in respect of expenditure of his own money. As per para 25 of GFR Vol-1, all departmental regulations involving financial character or having important financial bearing should be made by or with the approval of Ministry of Finance. i. Section 37 (u) of TDAP Ordinance provides that in the absence of TDAP financial rules, the Government rules are applicable, as the TDAP rules have not

26

been notified, the Government rules are applicable on TDAP. As per System of Financial Control & Budgeting 2006 read with serial No.9(16), the Ministry/Division is empowered to sanction expenditure on rent of nonresidential building up to Rs 10,000 p.m. The Trade Development Authority of Pakistan (TDAP) has been maintaining a guest house in Defence Housing Authority, Karachi in a rented building. The detail of rent paid from Export Market Development Fund (EMDF) in respect of this premises amounted to Rs 6.12 million, as detailed below:
Sr. No. 1 2 3 Per Month Rent 183,750 202,125 222,338 Period of Rent 10.06.2007 09.06.2008 10.06.2008 09.06.2009 10.06.2009 31.12.2009 to to to Cheque No. & Date B-323809 dated 28-06-2007 1750649 dated 09-06-2008 3701119 dated 26-06-2009 Total Amount (Rs) 2,205,000 2,425,500 1,489,661 6,120,161

Audit observed the following irregularities: i. ii. The payment of rent from EMDF account was not a valid charge under the EMDF Rules. The independent surveyor hired by TDAP, recommended a monthly rent of Rs 110,000 to Rs 125,000 for the rented premises. However, the premises was hired @ Rs 183,750 per month. An amount of Rs 224,155 was realized on account of room rent charges collected from the guests during 2008-09, while an expenditure of Rs 227,135 was incurred on account of utility and telephone charges paid from TDAP budget, which did not have any provision for the purpose. The receipt and expenditure analysis also suggests that maintenance of guest house at this cost was against the principle of prudence.

iii.

Audit maintains that the violation of cited rules in the subject case has made the public funds vulnerable to misuse. The DAC meeting was held on 25.01.2011 whereby the Principal Accounting Officer directed the management that an inquiry be undertaken within two weeks to find out the

27

facts and the report be provided to Audit. The DAC also advised that authorization for maintaining guest house at the cost of exchequer be produced to Audit. Audit recommends that responsibility be fixed, disciplinary action be initiated against officials responsible for this lapse and the payment from EMDF and TDAP funds be stopped forthwith.

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CHAPTER 3

3 3.1

MINISTRY OF COMMUNICATIONS Introduction of Ministry

Ministry of Communications functions as a central policy making and administrative authority on communications and transport sector in the country. Ministry of Communications consists of one division Communications Division. Ministry of Communications was set up in 1947, Sardar Abdul Rab Nishter was appointed as the first Communications Minister. In 1971-72, it was merged with the Ministry of Hajj and was separated in 1974, and in the same year, Ministry of Railways was attached with it by renaming the Ministry as Ministry of Communications and Railways. The Ministry of Railways was separated in later years. In the year 2002, Ministry of Railways was again merged with Ministry of Communications as its Division. This arrangement ended in the year 2003. Recently on 2nd September, 2004, Ministry of Communications has been bifurcated and Ports & Shipping Wing became an independent Ministry. The main objectives / functions of the Ministry of Communications are:

Prioritization of development projects and operational activities according to economic, social and strategic needs of the country Provide effective support to the economy Promote international competitiveness of our exports and increase operational effectiveness to meet challenges of globalization Integrate remote areas of the country into the economic mainstream Improve project monitoring and implementation Train and improve quality of human resources Enhance good governance through incentives and disciplinary action Improve values and ethics to build responsive organizations Provide safe and smooth travel on National Highways & Motorways Carry out research on road engineering, building and management Open up unexplored areas through expanding national roads networks

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3.2

Comments on Budget & Accounts (Variance Analysis)

Grant wise detail of current and development expenditure is mentioned below: (Figures in Rupees)

Audit noted that there was an overall saving of Rs 615 million, which was mainly due to saving of Rs 490 million in current grant and Rs 125 million in development grant. Supplementary grants obtained without careful cash forecasting In order to ensure prudent financial management, Para 13(vii) of System of Financial Control and Budgeting, 2006 states that Ministries / Divisions should be able to anticipate budgetary requirements well ahead of the financial year to which the budget relates and obtain the concurrence of the Finance Division. The Finance Division is expected to decline any request for supplementary grants except in extraordinary circumstances. This document further states that the funds obtained from supplementary grants shall be expended for the purposes for which these have been sanctioned. In current expenditure, demands for supplementary grants shall not be made, except in extraordinary circumstances. During the year, supplementary grants of Rs 445 million were obtained which were 10% of original allocation. According to Para 71 of General Financial Rules (Volume I), while framing budget estimates, the authorities should exercise utmost foresight. Variation between estimated and actual expenditure captures the level of foresight that goes into budget formulation. As shown in the graph below, the saving in current expenditure was 0.951%, which, after accounting for supplementary grants increased to savings of 9.36%. In development expenditure, savings against original budget was 75.45% which remained at 75.45% when supplementary grants were taken into account.

30

3.3

Brief comments on the status of compliance with PAC Directives

Years Total No Of Paras Compliance Non-Complied % of compliance 0 0 0 1987-88 0 0 0 1988-89 0 0 0 1989-90 0 0 0 1990-91 0 0 0 1991-92 0 0 0 1992-93 0 0 0 1993-94 0 0 0 1994-95 0 0 0 1995-96 0 0 0 1996-97 7 3 4 43% 1997-98 0 0 0 1999-00 31 31 0 100% 2000-01 0 0 0 2001-02 1 0 1 0% 2006-07 0 0 0 2008-09 Note: The report for the audit years 1998-99, 2002 2006, 2007-08 have not been discussed in the Public Accounts Committee (PAC)

31

3.4 3.4.1

AUDIT PARAS Irregularity & non compliance Unauthorized payment of house rent ceiling and recovery of Rs 55.23 million

3.4.1.1

The Finance Divisions O.M No. F-11 (1)-3/98 dated 03-03-2001 provides for house rent ceiling for prescribed stations (Islamabad, Rawalpindi, Lahore, Karachi, Peshawar & Quetta) to personnel who are not provided official residential accommodation. Audit observed that employees of the National Highways & Motorways Police (NH&MP) N-5 (North), Office of Deputy Inspector General (DIG), Quetta and Karachi, who were not residing at prescribed stations, drew house rent ceiling instead of house rent allowance during the financial years 2008-09 and 2009-10. The total payment on this count comes to Rs 55.23 million. Audit considers this payment as inadmissible under the rules. Audit maintains that the unauthorized payment of house rent ceiling put a burden on the resource constrained exchequer. Management replied that two audit paras of similar nature relating to N-5 South for the year 2007-08 and 2008-09 were discussed in the DAC meeting and it was decided to stop the payment of house rent ceiling and effect recovery from the employees at non specified stations. In the light of this decision, Ministry of Communications directed to the NH&MP to stop further payments of house rent ceiling and effect recovery involved. However, the aggrieved employees have filed a suit against the decision of DAC and the reference is under consideration in the Islamabad High Court, Islamabad. The reply is not acceptable as the exact orders of the Honorable Court have not been provided to Audit to ascertain whether court has issued any order restraining recovery and/ or further payment. The DAC meeting was held on 15.1.2011, which recommended that the evidence would be provided to Audit. Audit recommends that the management provide documentation establishing that court has issued any order restraining recovery or further payment of house rent ceiling.

32

3.4.2 3.4.2.1

Internal control weaknesses Difference between the total fine imposed and collected - Rs 171.60 million

Para 26 of GFR provides that subject to any special arrangement that may be authorized by competent authority with respect to any particular class of receipts, it is the duty of the departmental controlling officers to see that all sums due to Government are regularly and promptly assessed, realized and duly credited in the public account. Under rule 6 of the Road Maintenance Fund (RMF), the National Highways & Motorways Police (NH&MP) imposes fine on violators of traffic rules on the motorways and highways, while the amount of fine imposed is collected by National Highway Authority (NHA). Audit observed that the consolidated statement of fine amount provided by (NH&MP) for the years 2008-09 and 2009-10, had indicated a difference of Rs 171.60 million between amount of total fine imposed by NH&MP and total fine collected by NHA as detailed below:
Financial Year 2008-09 2009-10 Total Total fine imposed by NH&MP (Rs in millions) 1,432.803 1,406.261 2,839.064 Total Fine Collected by NHA (Rs in millions) 1,349.562 1,317.906 2,667.468 Difference (Rs in millions) 83.241 88.355 171.596

Audit considers that less collection of amount of fine has deprived the exchequer from Rs 171.60 million. While, this points out a weak internal control environment in the two organizations, it may actually involve an opportunity for leakage of public funds. In response to the observation, the management replied that NH & MP was only a fine imposing agency whereas the responsibility of collection of fine rests with NHA. Audit considered the reply unsatisfactory because reconciliation between both organizations was mandatory under rule 77 of FTR. The DAC meeting was held on 15.1.2011, which recommended that a committee, under chairmanship of Principal Accounting Officer, may be constituted to investigate the issue Audit recommends that the report of the committee be provided to Audit and missing amount of fine be traced out and recovered at the earliest.

33

CHAPTER 4

4 4.1

MINISTRY OF CULTURE Introduction of Ministry

The main responsibility of this Ministry relates to the promotion of education in arts and culture including all matters pertaining to the privately sponsored dancing and cultural troupes going abroad on commercial basis; development of arts council, institutions and galleries; financial assistance to arts organizations, artists and journalists and their bereaved families; Pride of performance awards in the field of arts; preservation and conservation of national museums and historical monuments declared to be of national importance; cultural pacts and protocols with other countries and their implementation; development and control of film industry; administration of Censorship of Films Act, 1963; establishment of cultural centers. The core operational activities of the Ministry are: i. ii. iii. iv. v. vi. To awaken the spirit of participation of the people of Pakistan and to safeguard their rights in promotion of culture. To relate our spiritual and cultural aspects with their physical manifestations. To map, record and document all tangible and intangible cultural assets in the country and to frame national cultural strategies to sustain cultural heritage. To further enrich our national language by making it truly representative of our national ethos. To provide a free and healthy environment for the promotion of all cultural activities at different levels of society. To encourage the thoughts and aspirations of our artists, intellectuals, musicians, singers, poets writers, artisans, architects, stage and film artists, dancers and other related with cultural activities towards the process of national integration, while retaining the integrity of cultural diversity in the federating units. To highlight and develop the principles laid down by Islam and the founding father of Pakistan in the promotion of our culture.

vii.

A number of initiatives in public sector programs (new and ongoing) have been undertaken. The most notable include the Establishment of National Monuments at Islamabad, Construction of National Art Gallery in Islamabad and Creative Works of National Museum, Islamabad.

34

The Ministry has been assigned the following functions as per Rules of Business, 1973: CULTURE WING i. ii. iii. Financial assistance to arts organizations, artists and journalists and their bereaved families Pride of Performance awards in the field of arts Promotion of education in arts and culture including all matters pertaining to the privately sponsored dancing and cultural troupes going abroad on commercial basis; development of arts councils, institutions and galleries, Pakistan National Council of Arts, National Institute of Folks and Traditional Heritage of Pakistan Cultural pacts and protocols with other countries and their implementation Development and control of film industry Administration of the Censorship of Films Act, 1963 Establishment of cultural centers

iv. v. vi. vii.

ARCHAEOLOGY WING i. Archaeology, national museums and historical monuments declared to be of national importance ii. Administrative control of: Department of Archaeology and Museums, Islamabad Quaid-i-Azam Academy, Karachi Authority for Preservation of Mohenjo-Daro Aiwan-e-Iqbal Complex, Lahore Iqbal Academy Pakistan, Lahore

35

4.2

Comments on Budget & Accounts (Variance Analysis)

Grant wise detail of current and development expenditure is mentioned below: (Figures in Rupees)
Grant No 17 18 140 Grant Type Current Current Subtotal Development Subtotal Total Original Grant 253,318,000 239,309,000 492,627,000 449,993,000 449,993,000 942,620,000 Supplementary Grant 23,522,000 29,302,000 52,824,000 3,000 3,000 52,827,000 Final Grant 276,840,000 268,611,000 545,451,000 449,996,000 449,996,000 995,447,000 Expenditure 268,696,724 264,144,461 532,841,185 934,560,484 934,560,484 1,467,401,669 %age Excess / (Saving) Excess/ (Saving) (8,143,276) (2.94) (4,466,539) (1.66) (12,609,815) (2.31) 484,564,484 107.68 484,564,484 107.68 471,954,669 47.41

Audit noted that there was an overall excess of Rs 471.954 million, which was due to excess of Rs 484.564 million in development expenditure that was partly offset by saving of Rs 12.6 million in current expenditure. Supplementary grants obtained without careful cash forecasting. In order to ensure prudent financial management, Para 13(vii) of System of Financial Control and Budgeting, 2006 states that Ministries / Divisions should be able to anticipate budgetary requirements well ahead of the financial year to which the budget relates and obtain the concurrence of the Finance Division. The Finance Division is expected to decline any request for supplementary grants except in extraordinary circumstances. This document further states that the funds obtained from supplementary grants shall be expended for the purposes for which these have been sanctioned. In current expenditure, demands for supplementary grants shall not be made, except in extraordinary circumstances. During the year, supplementary grants of Rs 52.83 million were obtained which were 5.5% of original allocation. According to Para 71 of General Financial Rules (Volume I), while framing budget estimates, the authorities should exercise utmost foresight. Variation between estimated and actual expenditure captures the level of foresight that goes into budget formulation. As shown in the graph below, the excess in current expenditure was 8.11%, which, after accounting for supplementary grants changed to savings of 2.31%. In development expenditure, savings against original budget was 107.68% which did not change when supplementary grants were taken into account.

36

4.3

Brief comments on the status of compliance with PAC Directives

Years Total No Of Paras Compliance Non-Complied % of compliance 0 0 0 1987-88 0 0 0 1988-89 0 0 0 1989-90 0 0 0 1990-91 0 0 0 1991-92 2 2 0 100% 1992-93 1 1 0 100% 1993-94 0 0 0 1994-95 3 3 0 100% 1995-96 1 1 0 100% 1996-97 31 6 25 19% 1997-98 0 0 0 1999-00 0 0 0 2000-01 8 6 2 75% 2001-02 2 0 2 0% 2006-07 1 0 1 0% 2008-09 Note: The report for the audit years 1998-99, 2002 2006, 2007-08 have not been discussed in the Public Accounts Committee (PAC)

37

4.4 4.4.1

AUDIT PARAS Fraud/Misappropriation Illegal award of 16 contracts - Rs 92.05 million

4.4.1.1

The clause 3(2) (v) of Lok Virsa Resolution dated 19.06.1983 envisages that the Board shall make contracts on behalf of the Institute. Rule 4 of Public Procurement Rules 2004 states that procuring agencies, while engaging in procurements, shall ensure that the procurements are conducted in a fair and transparent manner, the object of procurement brings value for money to the agency and the procurement process is efficient and economical. Audit noted that the management of Lok Virsa placed advertisement in the press on June 25, 2004 for outsourcing the Open Air Theatre, Museum shop, Cafeteria (Tuck Shop), Museum operation and maintenance/ marketing, Weekly Craft/ Artisan Bazar, Roof Top theatre, Artisan at work festival, and Training & Workshop / seminars. Three firms participated in the bidding process and one of the firms was found the lowest evaluated bidder. The management awarded the work (collaboration in various Joint ventures, events and programmes as well as rental of various facilities owned by Lok Virsa) to one firm through one umbrella agreement signed on 21.07.2004, for a period of 05 years, followed by fifteen sub-agreements signed on different dates. The 16 contracts involved an estimated business worth Rs 92.05 million, which is detailed in Annex-2. Audit observed the following irregularities in this case: i. The approval of Board of Governors (BOG) was not sought for the policy decision on outsourcing, joint ventures and collaborations as required under clause 3 (2) (v) of Lok Virsa Resolution dated19.06.1983. No power was delegated to the Executive Director (ED) for awarding of contracts. The advertisement notice contained a word etc. The word etc. involved various items of work worth Rs 12.50 million, which were not included in advertisement notice but were included in the bidding document only. Thus effective competitive process was discouraged through an inadequate advertisement notice, which did not adequately describe the scope of work and could not bring the prospective bidders to participate in the bidding process.

ii. iii.

38

iv.

v.

vi.

vii.

The bidding documents neither included any reference to the establishment of Virsa College of Arts, nor the bidders were evaluated against this requirement, however, the management signed a sub-agreement with the firm for establishment of a profit-oriented and commercially run Virsa College over 11000 square feet (later changed to 27,200 square feet of land) inside the Lok Virsa Complex. The competitive bidding was required instead of inclusion of a range of new items of work in the existing contracts. Thus, this fell within the scope of mis-procurement. The umbrella and fifteen sub-agreements were to expire on 21-07-2009 after completion of five years. However, the scope of work under three subagreements was drastically enhanced on several occasions (Annex-3) and further sub-agreements were signed, which were extended from time to time, without the approval of Board, for different lengths of times. The subject contracts were extended without taking into account the need for performance evaluation of the firm particularly when the firm was defaulting in payment of dues amounting to Rs 6.4 million. The umbrella agreement and five other sub-agreements involving Open Air Theatre, Museum Shops, Weekly Craft/Artisan Bazar, Roof Top Theatre and Artisan at work Festival expired on 20-07-2009. However, the firm was managing the tasks and holding public assets relating to these agreements without authorization at the time of audit.

Audit holds that these irregularities took place owing to collusion of the management with the firm, and resulted in surrendering of public funds and assets to the advantage of a business entity. In response to the observation, the management replied that after determining criteria for Public Private Partnership by a Committee, open press tenders were issued on 25-6-2004. The copies of advertisement, tender document and copy of first page profile of the firm, reveal that contract was awarded after meeting codal formalities to the highest bidder. Board of Governors in its 18th meeting held on 9-8-2005 approved the agreements. Public Private Partnership agreement with the firm was approved by the Board of Governors, which is fully empowered under clause 3(2) (v) of Resolution dated 19-61983. The reply is not satisfactory because the management neither provided the evidence to support their contention, nor addressed the particular irregularities pointed out by Audit.

39

The DAC meeting was held on 06.01.2011 but due to non-production of complete record from Lok Virsa, it decided that another meeting would be held after 10 days to discuss the issue of Lok Virsa. But no such meeting was convened till the finalization of this Report. Audit recommends that management (i) undertake an inquiry for investigating the matter in detail and fixing responsibility for manipulations and violations of rules and abrogate the contracts modified/extended without lawful authority (ii) immediately take over the assets from the firm in respect of contracts already expired, and (iii) recover outstanding dues from the firm. 4.4.2 4.4.2.1 Irregularity & non compliance Recovery of Rs 8.30 million from contractor

Para 26 of GFR Vol-I provides that subject to any special arrangement that may be authorized by competent authority with respect to any particular class of receipts, it is the duty of the departmental controlling officers to see that all sums due to Government are regularly and promptly assessed, realized and duly credited in the public account. The management of Lok Virsa signed eight agreements with a firm on 21.07.2004 for a period of 05 years for collaboration in various joint ventures, events and programmes. The agreements also involved renting out of various facilities owned by Lok Virsa. Audit observed that an amount of Rs 8,303,805 was outstanding against the firm since 2006. But no serious efforts were made by the management to recover the outstanding dues from the firm in violation of cited rule. The detail of these outstanding dues along with interest accrued is at Annex-4. Audit maintains that the inordinate delay in collection of dues deprived the exchequer from the benefit of Rs. 8.304 million. In response to the observation, the management replied that recoveries from the firm were made from 2004 to 2008 regularly, in accordance with the contracts. However, from 2008 to onward recoveries were not made regularly, despite monthly reminders and meetings at higher level. The management further replied that in response to the audit observation, the firm had issued a cheque to Lok Virsa management amounting to Rs 500,000 as first installment.

40

The reply is not satisfactory as management has not resorted to other options to ensure recovery of dues outstanding accumulating since 2008. Further, no proof of receipt of Rs 500,000 was provided to Audit. The DAC meeting was held on 06.01.2011 but due to non-production of complete record from Lok Virsa, it decided that another meeting would be held after 10 days to discuss the issue of Lok Virsa. But no such meeting was convened till the finalization of this Report. Audit recommends that management (i) undertake an inquiry for investigating the matter in detail and fixing responsibility and (ii) recover outstanding dues from the firm. 4.4.2.2 Recovery of Rs 23.57 million on account of illegal and unauthorized agreement of Virsa College of Arts

Paragraph 3(2)(v) of Notification No. 3(9)/82/ED dated 21-06-1983 issued by Ministry of Culture, Sports and Youth Affairs Division envisages that the Board of Lok Virsa shall make contracts on behalf of the institute. Para 26 of GFR provides that subject to any special arrangement that may be authorized by competent authority with respect to any particular class of receipts, it is the duty of the departmental controlling officers to see that all sums due to Government are regularly and promptly assessed, realized and duly credited in the public account. The Lok Virsa management entered into four agreements with a firm for establishment of Virsa College of Arts on different dates as detailed below:
Agreement A B C D Type of agreement Umbrella agreement Rental Deed Agreement for Establishing Virsa College of Arts Rental deed firms office and NICS administration block Date of signing 21.07.2004 Un dated 20.07.2005 20.09.2008

Audit observed the following irregularities in these contracts: a- Competitive bidding was not carried out. Thus, the award of contracts fell within the scope of mis-procurement. b- The approval of the Board was not obtained for signing of these agreements. The agreement D was signed by a Deputy Director, who was not authorized to extend the agreement.

41

c- The sub-agreements (referred to as B,C,D in the above table ) signed after the Umbrella agreement (referred to as A in the above table ) drastically changed the scope of work agreed in the Umbrella agreement as detailed in (i) (ii) and (iii) below: (i) Contrary to clause 7.3.7 of agreement A, the Lok Virsa was to charge 15 % of the tuition fee, collected by the firm subject to verification of students enrollment by Lok Virsa, once a year. However, the share from fee was never collected. Further, the management did not secure any list of enrollment of students to assess its share from the fee. Therefore, Audit collected information from Colleges prospectus and administration. On the basis of information collected, Audit calculated the total fee as Rs 22.032 million as detailed below:
Name of Course Graduate Diploma (2 Years) Diploma Course (1 Year) No. of students in one section x No. of sections x Tuition fee per year 40x4x153,000= Rs. 24,480,000/batch 40X4X76,500= Rs 12,240,000 Total fees of four batches = Fees/ batch x No. of Batches 24,480,000x4 = Rs 97,920,000 12,240,000x4= Rs 48,960,000 Total 15 % share of Lok Virsa from Tuition Fee (Rs) 97,920,000x0.15= Rs 14,688,000 48,960,000x.15= Rs 7,344,000 22,032,000

(ii) Under clause 7.3 of agreement C, the firm was required to pay 10% of the net profit from the college to the Lok Virsa on a yearly basis. Contrary to this provision, the management did not solicit the income statement from the firm to calculate and receive the share from the net profit. (iii) Under clause 1 of agreement B, the firm was to be allocated specified constructed temporary structure measuring 11,000 sq.ft. However, another clause, contrary to this provision was made in agreement C, which extended area of land from11,000 sq.ft to 27,200 sq.ft. d. Under clause 2 of agreement B, the firm was to use the premises only for educational purposes. Through a subsequently signed agreement D, this provision was amended to allow the firm to establish its commercial office and an administration block of NICS within Lok Virsa.

42

e. Under clause 11 of agreement B, the rental deed for the College was made for a period of 05 years. However, through clause 2 of the agreement C, the rental deed was extended for a period of 30 years. f. Under clause 5 of agreement C it was mandatory for the College/ University to offer number of courses. However, except one course, all courses offered at NICS were not related to the cause of folk heritage. Under clause 6.1 of agreement C, the Library Fee charged by NICS from its students, would go directly to Heritage Library, however, NICS despite charging Rs. 1200 from every student did not deposit the same with the Heritage Library. The outstanding dues assessed by Audit on this count came to Rs 1.536 million as detailed below:
No. of students in one section x No. of sections x Library fee per student 40x4x1200 = Rs. 192,000/batch --Do-Total fees of four batches = Library Fees collected / batch x No. of Batches 4 x 192,000 4 x 192,000 Total Total collection(Rs) 768,000 768,000 1,536,000

i.

Name of Course

Graduate Diploma Diploma Course

Audit maintains that as a result of the above mentioned irregularities in violation of cited rules, the public assets were misused for the benefit of individuals in total disregard to the principle of propriety. In response to the observation, the management replied that huge expenses were incurred on construction of NICS building, hiring of professors, teaching staff and other administrative expense. The firm has provided profit and loss statement for the periods 2007-08, 2008-09 and 2009-10 and list of students enrolled during the period. Contract for establishment of Virsa College of Arts was made with the approval of BOG in its 18th meeting for which BOG has been empowered by Ministry of Finance under Resolution 1983. Initially 15% of tuition fee was included in umbrella agreement signed on 21-7-2004, however no enrolment was made till establishment of Virsa College of Arts, when the same clause was replaced with 10% of net profit. Hence estimated fee worked out by Audit is not correct. The reply is not satisfactory because no para-wise comments have been offered on the specific irregularities pointed out by Audit. No evidence has been provided in support of stated contentions. The management has itself conceded about making changes in the

43

contracts, which are to the detriment of public interest. Further, the management has not responded on issues such as actual collection of share in profit and Library Fee. Audit also holds that both tuition fee and share in profit are receivables of Lok Virsa as none of the agreements envisaged replacing share in tuition fee with share in profit. Rather both appear as distinct receivables in two different agreements. The DAC meeting was held on 06.01.2011 but due to non-production of complete record from Lok Virsa, it decided that another meeting would be held after 10 days to discuss the issue of Lok Virsa. But no such meeting was convened till the finalization of this Report. Audit recommends that management (i) undertake an inquiry for investigating the matter in detail and fixing responsibility for manipulations and violations of rules in the agreements and (ii) recover outstanding dues from the contractor. 4.4.2.3 Recovery of Rs 3.12 million on account of illegal and unauthorized construction and operation of Virsa cafeteria/restaurant

Paragraph 3(2)(v) of Notification No. 3(9)/82/ED dated 21-06-1983 issued by Ministry of Culture, Sports and Youth Affairs Division envisages that the Board of Lok Virsa shall make contracts on behalf of the institute. Para 26 of GFR provides that subject to any special arrangement that may be authorized by competent authority with respect to any particular class of receipts, it is the duty of the departmental controlling officers to see that all sums due to Government are regularly and promptly assessed, realized and duly credited in the public account. Lok Virsa entered into the following agreements with a firm. Agreement Agreement A Agreement B Agreement C Type of agreement Umbrella agreement Rental Deed Museum Cafeteria Extended Rental Deed of Museum Cafeteria Date of signing 21.07.2004 Un dated 30.09.2008

In line with the clause 3 of umbrella agreement (referred to as A in the above table), the firm was under obligation to establish a cafeteria at Lok Virsa. Later a sub-agreement (referred to as B in the above table) in the form of an undated rental deed was signed with the firm. As per this agreement, the firm was allowed to establish a Cafeteria in open lawn of Museum Complex for a period of 5 years. In accordance with the provisions of

44

sub-agreement B, a cafeteria, measuring 42 x 15 ft. was built by the firm. On 30th September, 2008, Lok Virsa signed another sub-agreement (referred to as C in the above table) for a period of 10 years. This agreement allowed the firm to build another structure measuring 4159 sq.ft, named Virsa Caf, a restaurant, in the open lawn of Lok Virsa. This sub-agreement also granted permission to the lessee for free usage of open spaces as portable kiosks provided that the lessee undertakes to bear the cost of maintenance of the area. Audit observed that: a- The contracts were awarded without open competition and without the approval of the Board of Governors (BOG). b- Agreement C signed on 30.09.2008 was unauthorized and illegal, as it involved construction of a restaurant not envisaged in the umbrella agreement (agreement A) and the original un-dated lease deed (agreement B), c- No amount on account of rent from Virsa Cafeteria was charged by Lok Virsa. Audit calculated it from the date of occupation of Virsa Caf by the vendor in the light of instructions issued by Ministry of Housing and Works. Period Area Rent/Month (Rs) 4,159xRs 30 = 124,770 Total amount outstanding (Rs) 124,770x 25= 3,119,250

01.10.2008 to 31.11.2010

4159 sq. ft

d- The original specified space of 42 ft. x 15 ft allotted to the firm vide agreement B, as cafeteria, remained in the possession of firm, and was renamed Tuck Shop but the firm stopped paying its rent w.e.f. 30-09-2008. e- The Lok Virsa Caf, purported to serve visitors at the Lok Virsa Museum, has become a purely commercial venture, which remains open 7 days a week till mid night. This indicates that the Cafeteria is catering to elite of the city and not to the visitors to the museum. Audit maintains that as a result of the above mentioned irregularities in violation of cited rules, the public assets were misused for the benefit of individuals in total disregard to the principle of propriety.

45

In response to the observations, the management replied that as per clause 3.1 of umbrella agreement, the firm was to establish the museum cafeteria in the premises of Lok Virsa. Initially the firm paid rent @ Rs 25,000 p.m. for the temporary set up of cafeteria (Tuck Shop) and finally on construction of proper building shifted to museum cafeteria (4159 sq.ft). Lok Virsa is charging rent @ Rs 31,250 w.e.f. 1-10-2008. In addition to this the firm was allowed to use area opposite to Havelli/cafeteria for portable kiosk. On completion of new Museum Cafeteria, the firm was allowed to use old structure as Tuck Shop/information centre for which Lok Virsa was not charging any rent. As pointed out by Audit, the firm has agreed to pay rent @ Rs 10,000 p.m. w.e.f. 1-10-2008 onward for the facility which comes out Rs 270,000 till date. The area of cafeteria building shown in agreement B i.e. 42X15 is incorrect and has been corrected in revised agreement . The reply is not satisfactory because no para-wise comments have been offered on the specific irregularities pointed out by Audit. No evidence has been provided in support of the stated contentions. The management has itself conceded about making frequent changes in the contracts. The revisions in the scope of work made through a number of contracts cannot be justified by claiming that the contents of previous contract were incorrect since each contract has its own sanctity and there is a due process of law for revision of contracts. The DAC meeting was held on 06.01.2011 but due to non-production of complete record from Lok Virsa, it decided that another meeting would be held after 10 days to discuss the issue of Lok Virsa. But no such meeting was convened till the finalization of this Report. Audit recommends that management (i) undertake an inquiry for investigating the matter in detail and fixing responsibility for manipulations and violations of rules and abrogate the contracts made without lawful authority (ii) immediately take over the assets from the contractor in respect of contracts already expired, and (iii) recover outstanding dues from the contractor. 4.4.2.4 Non sharing of revenues by the firm for holding festivals Rs 3.80 million

Paragraph 3(2)(v) of Notification No. 3(9)/82/ED dated 21-06-1983 issued by Ministry of Culture, Sports and Youth Affairs Division envisages that the Board of Lok Virsa shall make contracts on behalf of the institute. Para 26 of GFR provides that subject to any special arrangement that may be authorized by competent authority with respect to any particular class of receipts, it is the duty of the

46

departmental Controlling officers to see that all sums due to Government are regularly and promptly assessed, realized and duly credited in the public account. Audit observed that the management entered into three agreements with a firm for holding of annual festivals on different dates. The detail of these agreements is as under:
Agreement Agreement A Agreement B Agreement C Type of agreement Umbrella agreement Artisan at Work Festival Artisan at Work Exhibition Date of Signing 21.07.2004 06.05.2006 07.07.2006

Audit noted the following irregularities in this case: i. The approval of the Board of Governors (BoG) was not obtained for signing of this agreement. The Executive Director was not delegated any power to enter in such agreements. No record was provided to Audit on actual number of festivals organized. For organizing festivals, the firm did not provide a minimum of Rs.2.5 million for each festival as required under clause 6.1.2 (b) (i) of the agreement A. No revenue from the festival income was shared with the Lok Virsa as required under clause 6.1.2 (b) (vi) of the agreement A. Lok Virsa provided Rs. 3.8 million to the firm for the purpose of holding the annual festivals in violation of clause 6.1.2 (b) (iii) of the agreement A, which reads that Lok Virsa will not bear the expenditure incurred on holding of the above functions. Detail of the payment is given below:
S. No. 1 2. Event Artisan at Work Festival Artisan at Work Festival Amount(Rs) 2,508,000 1,250,000 Cheque No. & Date 633038 dated 17.05.2006 546408 dated 30.10.2008

ii. iii. iv. v.

vi. vii.

The firm did not deposit agreed share of Rs 3.8 million in Lok Virsa Account as required under clause 3 and clause 7 of agreement B dated 06.05.2006. The firm did not deposit non-refundable goodwill charges of Rs 2 million for each festival with 10 % increase in subsequent year payable to Lok Virsa as required under clause 14 of agreement C 07.07.2006.

47

viii. ix.

No sponsorship deeds were submitted to Lok Virsa as required under clause 7 of agreement C. By non-submission of sponsorship deeds and non-sharing of the revenue earned, the firm violated the contract dated 07-07-2006. The management was required to forfeit full amount or a portion of amount deposited by the firm as provided in clause 17 of the agreement C. But no action was initiated against the firm.

Audit holds that the management did not exercise due care in executing agreements, and collecting due share from the firm in violation of cited rules, which resulted in loss of revenue to exchequer. In response to the observation, the management replied that due to lack of resour ces, agreements were made with the private partner to hold these festivals under joint venture with 50-50 investment. As per agreement, in addition to Folk Festival at Lok Virsa, such festivals were planned to be held in other cities and abroad. Investment of Rs. 10 Million was not made because of the fact that Lok Virsa had no resources to share the cost of festival on massive scale. The firm paid two cheques, cheque No. 9013016 dated 30-102006 of Rs 1 million and cheque No. 9842771 dated 16-01-2007 of Rs 1 million, as goodwill money for the festival. As regards payment of Rs. 3.8 million, it was made to the firm for organizing a festival under development project Museum Educational Programme. The reply is not satisfactory because no para-wise comments have been offered on the specific irregularities pointed out by Audit. No record relating to receipt of cheques from the firm has been produced to Audit. The DAC meeting was held on 06.01.2011 but due to non-production of complete record from Lok Virsa, it decided that another meeting would be held after 10 days to discuss the issue of Lok Virsa. But no such meeting was convened till the finalization of this Report. Audit recommends that management (i) undertake an inquiry for investigating the matter in detail and fixing responsibility and (ii) recover outstanding dues from the contractor and (iii) provide complete record relating to festivals to Audit.

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4.4.2.5

Loss of Rs 8.12 million due to outsourcing of Lok Virsa museum on uneconomical terms

Para 18 of GFR Vol-I states that no contracts be entered into by any authority which has not been empowered to do so. Lok Virsa entered into the following agreements with a firm on 21.07.2004 for museum operation, maintenance and marketing on profit sharing basis as per the following detail:
Agreement Agreement A Type of agreement Umbrella agreement Museum Operation and Maintenance/Marketing Rental deed extended Date of signing 21.07.2004 for a period of 5 years

Agreement B

on 30-09-2008 but time period for extension not mentioned.

Since 2004-05 to 2009-10, the firm reported to have earned a profit of Rs 21.48 million, in which the 50% share of Lok Virsa amounts to Rs 10.74 million as per the detail provided in the following table:
Year Receipts(Rs) Share of Lok Virsa from museum (50% share) Expenditure(Rs) Expenditure incurred by Expenditure Lok Virsa on electricity incurred by Lok charges Virsa for maintenance of museum 1.563 0.456 0.784 1.200 1.445 0.628 5.620 0.544 1.119 1.871 1.237 0.857 6.084

2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Total

0.931 1.292 2.502 1.596 2.264 2.155 10.740

Audit noted the following irregularities in this case: i. The agreement was entered into without approval of the BOG. ii. The very raison dtre of this agreement was to earn revenue by outsourcing the maintenance and operation/marketing of the museum. However, as the collected data suggests, the management had to incur an expenditure of Rs.11.704 million

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iii.

iv.

v.

vi.

vii.

(for maintenance of museum and electricity charges for the museum) against revenue of Rs. 10.74 million. Thus, there was a deficit of Rs 0.964 million despite outsourcing the museum. While the contract agreement for outsourcing of museum was titled Museum Operation & Maintenance/Marketing/Operation the maintenance remained the responsibility of Lok Virsa under the terms of contract. Thus, Lok Virsa had to bear maintenance and electricity charges. No major expenditure was incurred on Heritage Museum by the firm except providing security guards and ticket selling staff. With these limited responsibilities of the firm, there were not sufficient grounds for sharing of revenue on fifty percent basis. The management would have earned an additional income of Rs 10.740 million, if the museum had been managed by Lok Virsa on its own. Clause 4.1.3 of umbrella agreement, the firm was to allocate a specific budget of Rs.2.5 million for museum marketing and education programme but there is no documentary evidence of any such investment. The revision of contract on 30.09.2008 extended the length of contract for an indefinite length of time. The contract was extended without considering the profit/loss analysis, performance of the firm and without any open competition. The management did not solicit any audited statement from the firm to verify the revenues earned by the firm.

The above mentioned irregularities indicate that the management provided undue favor to the firm at the expense of exchequer contrary to the cited rules. In response to the observation, the management replied that the firm has hired staff for security, cleanliness, marketing publicity and also meeting expenses on such cleanliness and maintenance. The firm has hired 18 employees in addition to general maintenance and upkeep. Expenditure on hiring of staff and maintenance of wash rooms, museum galleries, open area and lawns is more than the revenue of museum. The reply is not satisfactory because no para-wise comments have been offered on the specific irregularities pointed out by Audit. In a situation, where the management underutilized its staff previously performing various duties at the museum, there was no justification for outsourcing general maintenance and upkeep to the firm. The DAC meeting was held on 06.01.2011 but due to non-production of complete record from Lok Virsa, it decided that another meeting would be held after 10 days to discuss

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the issue of Lok Virsa. But no such meeting was convened till the finalization of this Report. Audit recommends that management (i) undertake an inquiry for investigating the matter in detail and fixing responsibility and (ii) recover outstanding dues from the contractor (iii) take over the museum from the firm as it is running in loss.

4.4.2.6

Irregular retention and utilization of departmental receipts - Rs 7.95 million

Section-8 of the Pakistan National Council of the Arts Act, 1973 states that the fund of the Council shall be derived from following sources, namely: 1) Grants of the Federal Government and the Provincial Governments; and 2) Contributions and donations from individuals, local bodies, corporations, institutions, organizations and agencies. Para-26 of the General Financial Rules states subject to any special arrangement that may be authorized by competent authority with respect to any particular class of receipts, it is the duty of the departmental controlling officers to see that all sums due to Government are regularly and promptly assessed, realized and duly credited in the public account. Rule-7(1) of the Federal Treasury Rules states Moneys received shall not be appropriated to meet departmental expenditure, nor otherwise kept apart from the Federal Consolidated Fund of the Federal Government. No department of the Government may require that any moneys received by it on account of the revenues of the Federal Government be kept out of the Federal Consolidated Fund of the Federal Government. Audit noted that an amount of Rs 7,953,061 was collected by PNCA, from sources other than mentioned in Section-8 of the Pakistan National Council of the Arts Act, 1973, during 2009-10. This receipt was retained by PNCA as receipt of its fund. Audit observed that the subject receipt has been generated by PNCA on account of rental charges of its different facilities as detailed in the following table:

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Sr. 1 2 3 4 5 6 7 8 9 10 11

Sources of Receipts Art Club Auditorium Cultural Sows and Programs Generator Sale of paintings Lawn / Terrace Gift Shop Sale of Portfolios Gallery Visitors Sale of Publications Galleries Total

Amount (Rs) 124,500 5,408,500 717,570 233,900 156,500 339,980 75,000 8,250 58,525 139,336 691,000 7,953,061

Audit further observed that this receipt has been erroneously treated by the management as contribution which under the PNCA Act could be used for departmental purposes. However, this receipt did not legally fall in the definition of contribution. Audit maintains that this receipt is the income earned by the management from public assets and thus belongs to exchequer. Thus, retaining it as part of PNCA fund is in violation of cited rule. Audit maintains that the unauthorized retention of receipt has deprived the exchequer of its receipt. In response to the observation, the management replied that the Council is being funded by the Federal Government in the shape of grant in aid on submission of detailed budgetary requirements. Since its inception the Council has been provided with insufficient grants against genuine demands. The inadequate release of grant always resulted to defer the scheduled programs. In order to supplement its activities the PNCA Act allows to generate funds from other sources as provided vide Section 8(ii) of PNCA Act and accordingly these funds were generated, received and used. The reply is not satisfactory in view of the meanings of the term contribution. A DAC meeting was held on 06-01-2011, in which the management stated that the receipts objected by Audit are reflected in the budget estimates of PNCA and are submitted to Finance Division annually. The DAC directed that the record be produced to Audit for consideration. Audit recommends that the decision of DAC be implemented.

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CHAPTER 5

5 5.1

ECONOMIC AFFAIRS DIVISION Introduction of Division

The Economic Affairs Division is responsible for assessment of requirements, programming and negotiations of external economic assistance related to the Government of Pakistan and its constituent units from foreign Governments and multilateral agencies. The issues regarding external debt management and matters relating to technical assistance to foreign countries, credit to friendly countries on lending/re-lending of foreign loans and monitoring of aid utilization are being handled by this Division. The functions and responsibilities of the Economic Affairs Division as listed in Schedule II of Rules of Business 1973 are as under: Assessment of requirements, programming and negotiations for external economic assistance from foreign governments and organizations Matters relating to International Bank for Reconstruction and Development, International Development Agency, International Finance Corporation, Asian Development Bank, International Fund for Agricultural Development Economic matters pertaining to Economic and Social Council of the United Nations, Governing Council of United Nations Development Program, Economic and Social Commission for Asia and Pacific, Colombo Plan and Organization for Economic Co-operation and Development (Development Assistance Committee) Negotiations and coordination activities etc., pertaining to economic cooperation with other countries Assessment of requirements, programming and negotiation for securing technical assistance to Pakistan from foreign governments and organizations including nominations for EDI courses Matters relating to technical assistance to foreign countries External debt management, including authorization of remittances for all external debt service, compilation, accounting and analysis of economic assistance from foreign governments and organizations Review and appraisal of international and regional economic trends and their impact on the national economy. Proposals concerning change in international economic order Matters relating to transfer of technology under UNDP assistance Matters relating to Islamic Development Bank

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5.2

Comments on Budget & Accounts (Variance Analysis)

Final budget allocated to the Economic Affairs Division for the financial year 2009-10 was Rs 345,400.90 million of which the Division utilized Rs 361,985.73 million after obtaining Supplementary Grant of Rs 20,733 million. The grant-wise break-up is given below: (Figures in Rupees)
Grant No Name of Grant Original Grant 256,639,000 256,639,000 Supplementary Grant 4,698,302,000 4,698,302,000 Final Grant 4,954,941,000 4,954,941,000 %age Excess / (Saving) Excess/ (Saving) 1,180,236,036 (3,774,704,964) (76.18) 1,180,236,036 (3,774,704,964) (76.18) Expenditure

26 Current Expenditure Subtotal

Development Expenditure of 106,300,000 106,300,000 1,432,166,359 1,325,866,359 1,247.29 144 Economic Affairs Division External Development Loans 55,824,800,000 - 55,824,800,000 98,442,152,746 42,617,352,746 76.34 178 and Advances Subtotal 55,931,100,000 - 55,931,100,000 99,874,319,105 43,943,219,105 78.57 B Servicing of Foreign Debt 70,334,203,000 428,231,000 70,762,434,000 64,316,513,016 (6,445,920,984) (9.11) C Foreign Loans Repayment 132,446,428,000 15,607,311,000 148,053,739,000 157,714,102,010 9,660,363,010 6.52 Repayment of Short Term 65,698,762,000 - 65,698,762,000 38,900,555,748 (26,798,206,252) (40.79) D Foreign Credits Subtotal - Charged 268,479,393,000 16,035,542,000 284,514,935,000 260,931,170,774 (23,583,764,226) (8.29) Total 324,667,132,000 20,733,844,000 345,400,976,000 361,985,725,915 16,584,749,915 4.80

Supplementary grants were obtained without careful cash forecasting In order to ensure prudent financial management, Para 13(vii) of System of Financial Control and Budgeting, 2006 states that Ministries/Divisions should be able to anticipate budgetary requirements well ahead of the financial year to which the budget relates and obtain the concurrence of the Finance Division. The Finance Division is expected to decline any request for supplementary grants except in extraordinary circumstances. This document further states that the funds obtained from supplementary grants shall be expended for the purposes for which these have been sanctioned. In current expenditure, demands for supplementary grants shall not be made, except in extraordinary circumstances. During the year, supplementary grants of Rs 20,733.84 million were obtained which were 6.2% of original allocation. Major supplementary grants were obtained for Repayment of Foreign Loans amounting to Rs 15,607.31 million which was 11.4% of the original allocation.

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COMPOSITION OF ACTUAL EXPENDITURE: The composition of actual expenditure of EAD depicted that actual expenditure mainly comprised Charged portion which accounted for 82.1 percent of EADs actual expenditure. The charged expenditure of EAD comprised Servicing of Foreign Debt, Foreign Loan Repayment and Repayment of Short Term Foreign Credits, as exhibited below:

5.3

Brief comments on the status of compliance with PAC Directives

Years Total No Of Paras Compliance Non-Complied % of compliance 0 0 0 1987-88 0 0 0 1988-89 1 1 0 100% 1989-90 0 0 0 1990-91 0 0 0 1991-92 5 5 0 100% 1992-93 0 0 0 1993-94 0 0 0 1994-95 0 0 0 1995-96 2 1 1 50% 1996-97 0 0 0 1997-98 0 0 0 1999-00 0 0 0 2000-01 0 0 0 2001-02 2 0 2 0% 2006-07 2 0 2 0% 2008-09 Note: The report for the audit years 1998-99, 2002 2006, 2007-08 have not been discussed in the Public Accounts Committee (PAC)

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5.4 5.4.1

AUDIT PARAS Performance Payment of Commitment Charges USD 3.66 million

5.4.1.1

Para 12 of GFR Vol I provides that the controlling officer must see not only that total expenditure is kept within the limits of the authorized appropriation but also that the fund allotted to spending units are expended in public interest and on objects for which the money was provided. Audit noted that commitment charges amounting to USD 3,660,788 had been paid by Economic Affairs Division (EAD) against undisbursed portion of proceeds of various loans during the financial year 2009-2010. Audit maintains that commitment charge is a kind of penalty for not utilizing the loan proceeds committed by lenders for disbursement in a particular year therefore, it is important to ensure efficiency and timeliness in utilization of loan proceeds. The commitment charges paid in the cited cases indicate failure in project management, which led to payment of commitment charges. In response to the audit observation, management has replied that commitment charges have been paid as per the clauses of agreements. The reply is not satisfactory, because invoking penal clauses indicates failure to utilize the loan efficiently. Moreover, the management did not comment on opening of separate grant for payment of commitment charges. The DAC meeting was not convened by the PAO till the finalization of this audit report. Audit recommends that responsibility be fixed upon project managers, whose failure resulted in payment of commitment charges. Further, commitment charges should be reflected in a separate grant in the annual budget so that it is reported as a separate item in the financial statement.

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CHAPTER 6

6 6.1

MINISTRY OF EDUCATION Introduction of Ministry

Under the Rules of Business 1973 as amended from time to time, Ministry of Education is responsible for the overall development of educational infrastructure and policy planning and implementation. The core operational activities of the Ministry are: 1) Development and coordination of national policies, plans and programs in education 2) Development of curricula and textbooks, National Book Foundation 3) Establishment and maintenance of national educational institutions 4) Organizations and disbursement of grant-in-aid to educational institutions 5) Development of instructional technology, promotion and coordination of educational research 6) External examination and equivalence of degrees and diplomas, etc

6.2

Comments on Budget & Accounts (Variance Analysis)

Grant wise detail of current and development expenditure of Education Division is mentioned below: (Figures in Rupees)
Grant Grant Type No 28 30 31 146 Current Current Current Subtotal Development Subtotal Total Original Grant 627,678,000 809,020,000 2,281,967,000 3,718,665,000 8,097,613,000 8,097,613,000 11,816,278,000 Supplementary Grant 166,146,000 625,505,000 92,008,000 883,659,000 24,398,000 24,398,000 908,057,000 Final Grant 793,824,000 1,434,525,000 2,373,975,000 4,602,324,000 8,122,011,000 8,122,011,000 12,724,335,000 Expenditure 785,999,867 1,369,749,925 2,881,216,250 5,036,966,042 2,474,261,169 2,474,261,169 7,511,227,211 Excess / (Saving) (7,824,133) (64,775,075) 507,241,250 434,642,042 (5,647,749,831) (5,647,749,831) (5,213,107,789) %age Excess/ (Saving) (0.99) (4.52) 21.37 9.44 (69.54) (69.54) (40.97)

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Audit noted that: There was an overall saving of 41 percent amounting to Rs 5,213.1 million. In development expenditure, there was a saving of Rs 5,647.749 million, which was partially offset by excess expenditure of Rs 434.642 million in current expenditure. Savings in development expenditure was the result of savings in Education for All Program of Rs 1,949.6 million and savings in function of general universities / colleges / institutes of Rs 1,355.8 million. Supplementary grants obtained without careful cash forecasting In order to ensure prudent financial management, Para 13(vii) of System of Financial Control and Budgeting, 2006 states that Ministries / Divisions should be able to anticipate budgetary requirements well ahead of the financial year to which the budget relates and obtain the concurrence of the Finance Division. The Finance Division is expected to decline any request for supplementary grants except in extraordinary circumstances. This document further states that the funds obtained from supplementary grants shall be expended for the purposes for which these have been sanctioned. In current expenditure, demands for supplementary grants shall not be made, except in extraordinary circumstances. During the year, supplementary grants of Rs 908.057 million were obtained which were 7.68% of original allocation. According to Para 71 of General Financial Rules (Volume I), while framing budget estimates, the authorities should exercise utmost foresight. Variation between estimated and actual expenditure captures the level of foresight that goes into budget formulation. As shown in the graph below, the excess in current expenditure was 35.45%, which, after accounting for supplementary grants reduced to 9.44%. In development expenditure, savings against original budget was 69.44% which changed to 69.54% when supplementary grants were taken into account.

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6.3

Brief comments on the status of compliance with PAC Directives

Years Total No Of Paras Compliance Non-Complied % of compliance 0 0 0 1987-88 2 2 0 100% 1988-89 8 3 5 38% 1989-90 6 6 0 100% 1990-91 12 6 6 50% 1991-92 24 22 2 92% 1992-93 22 22 0 100% 1993-94 10 7 3 70% 1994-95 6 6 0 100% 1995-96 8 8 0 100% 1996-97 0 0 0 1997-98 0 0 0 1999-00 35 5 30 14% 2000-01 0 0 0 2001-02 3 0 3 0% 2006-07 0 0 0 2008-09 Note: The report for the audit years 1998-99, 2002 2006, 2007-08 have not been discussed in the Public Accounts Committee (PAC)

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6.4 6.4.1

AUDIT PARAS Non-production of record Unjustified and unverified re-instatement of sacked employees by the Federal Directorate of Education

6.4.1.1

In terms of Section 14 of the Auditor-Generals Ordinance 2001 and Para-17 of GFR Vol-I, it is the duty of every Department/Controlling Officer to afford all reasonable facilities to the audit in the discharge of their duty and to furnish the fullest possible information which they may ask for in connection with the preparation of an account or report which it is their duty to prepare. No information or book should be withheld, which is the statutory right of the Audit to see on behalf of the Auditor-General of Pakistan. The Presidential Ordinance bearing No. 2(1)/2009-Pub(Ordinance No.II of 2009) dated 14-12-2009, provided relief to persons who were appointed in a corporation service or autonomous or semi-autonomous bodies or in government service during the period from 1-11-1993 to 30-11-1996 and who were dismissed, removed or terminated from service between 1-11-1996 and 31-12-1998 and subsequently extended the period up to 12-101999 shall be re-instated immediately in service on one scale higher to their substantive scale of the post at the time of termination of service and report for duty to their respective departments or organizations. Audit noted that the Federal Directorate of Education, Islamabad, had reinstated 407 sacked employees w.e.f. 1-8-2009 on the basis of data verified by the respective educational institutions. The data was submitted to the Ministry for further scrutiny, which cleared only 165 of these employees as meeting the criteria for reinstatement. Audit was not in position to authenticate as how many individuals were actually reinstated and whether the individuals reinstated met the eligibility criteria, as the relevant record was not provided to Audit despite several requests. Audit holds that the non production of record limited the scope of audit and impeded the process of accountability and transparency. No reply was received till finalization of this audit report. The DAC meeting was not convened by the PAO till the time of finalization of this audit report.

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Audit recommends that responsibility be fixed, disciplinary action be initiated against officials responsible for this lapse under relevant Efficiency and Discipline Rules as required under Section 14(3) of Auditor-General's (Functions, Powers and Terms and Conditions of Service) Ordinance, 2001 and record be provided to Audit for review. 6.4.1.2 Non production of record of unauthorized drawl of funds/ appropriation of Rs 9.25 million to endowment fund account

According to section 14 of Auditor-General's (Functions, Powers and Terms and Conditions of Service) Ordinance, 2001, the Auditor-General shall, in connection with the performance of his duties under this Ordinance, have authority to require that any accounts, books, papers and other documents which deal with, or form, the basis of or otherwise relevant to the transactions to which his duties in respect of audit extend, shall be sent to such place as he may direct for his inspection. Para 25 of GFR, Vol.-I stipulates that any orders or instructions involving financial character should be made with the approval of the Ministry of Finance. According to rule 7 (1) of the Federal Treasury Rule Vol-I all moneys received by or tendered to Government officers on account of revenue of Federal Government shall without undue delay be paid in full into a Treasury. Moneys received as aforesaid shall not be appropriated to meet the departmental expenditure nor otherwise kept apart from the Federal Consolidated Fund. The National College of Arts, Lahore, under the administrative control of Ministry of Education, withdrew government receipts of Rs 9,256,233 from account No. 2210986, General Fund Account and deposited into Endowment Fund Account No.102641-3. Audit observed that the management could not produce the approval of Ministry of Finance for opening of bank accounts, establishment of endowment fund, and detail of receipts and expenditure pertaining to these accounts for review. In the absence of the record required as per rules quoted above, Audit was not in a position to ascertain the validity of expenditure incurred. In response to the observation, management replied that the College is an autonomous body and not a formal Federal Government Department. It is governed by its Board of Governors (BOG) and whereas the Federal Treasury Rules are not applicable to NCA unless these are adopted by the BOG. The BOG has created an Endowment Fund which is governed by a Trust Deed. Under Section 11 of the NCA Ordinance 1985, the Board of

61

Governors as Principal Executive body, has full power to hold, control and administer the property and funds of the College. As per decision of the BOG, the self finance fee is distributed at the ratio of 40:60 between Endowment Fund and College income. However both sources are used for the development of the College. The reply of the management is not satisfactory in the absence of supporting documentary evidence. The DAC meeting was not convened by the PAO till the time of finalization of this audit report. Audit recommends that responsibility be fixed, disciplinary action be initiated against officials responsible for this lapse under relevant Efficiency and Discipline Rules as required under Section 14(3) of Auditor-General's (Functions, Powers and Terms and Conditions of Service) Ordinance, 2001 and record be provided to Audit for review and validity of expenditure. 6.4.1.3 Non-production of record of recruitment of 451 teaching staff

Section 14 of Auditor-General's (Functions, Powers and Terms and Conditions of Service) Ordinance, 2001, provides the Auditor-General shall, in connection with the performance of his duties under this Ordinance, have authority to require that any accounts, books, papers and other documents which deal with, or form, the basis of or otherwise relevant to the transactions to which his duties in respect of audit extend, shall be sent to such place as he may direct for his inspection. The Federal Directorate of Education (FDE) advertised 280 vacant posts of teaching staff comprising 195 Matriculate Trained Teachers (MTT) and 85 Trained Under-Graduate Teachers (TUGT) in May 2009. Walk-in Interviews were held in June, 2009 to fill the vacant posts. The appointments were made in June and July 2009 in two phases. Audit observed that the management actually recruited 451 teaching staff against the 280 advertized positions. However, the management did not provide the detailed record to Audit for further scrutiny. Audit holds that denial of access to record is in violation of Section 14 of the AGPs Ordinance. In the absence of the record required as per rules quoted above, Audit was not in a position to ascertain the validity of recruitments.

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No reply was received till finalization of this audit report. The DAC meeting was not convened by the PAO till the time of finalization of this audit report. Audit recommends that responsibility be fixed, disciplinary action be initiated against officials responsible for this lapse under relevant Efficiency and Discipline Rules as required under Section 14(3) of Auditor-General's (Functions, Powers and Terms and Conditions of Service) Ordinance, 2001 and record be provided to Audit for review. 6.4.2 6.4.2.1 Fraud/Misappropriation Fraudulent payment of Rs 11.36 million for construction of 10 schools

According to para 20 of GFR Vol-I any loss of public money, departmental revenue or receipts, stamps, opium, stores or other property held by or on behalf of Government, caused by defalcation or otherwise, which is discovered in a treasury or other office or department, should be immediately reported by the officer concerned to his immediate official superior as well as to the Accountant General, even when such loss has been made good by the party responsible for it. According to para-8 (IV) of System of Financial Control and Budgeting, 2006 as a general rule, no payment can be made to contractor/supplier except for work actually done or supplies actually received. According to Para-209 (ii) (d) of Central Public Works Account (CPWA) Code all payments for a work or supplies are based on the quantities recorded in the measurement book, it is incumbent upon the person taking the measurement to record the quantities clearly and accurately. Grant for Sustainability of Community Schools Established by National Education Foundation (NEF) for construction of schools in Azad Jammu & Kashmir, involved construction of 10 schools. The contract was awarded to a firm at a cost of Rs 11,360,130. This amount was paid by NEF against physical verification of the works by the Site Engineer and Quantity Surveyor. However, the Monitoring and Evaluation Cell of NEF reported that no construction work had been carried out. A departmental committee was constituted to check the quantity and quality of the constructed schools. The committee pointed out a payment of Rs 11.36 million to the contractors through fictitious measurement of earth work. The committee accordingly proposed recovery of funds from the contractors.

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Audit noted that this was an explicit instance of fraud and should have been reported to the Auditor-General of Pakistan by the management as required under para 20 of GFR Vol-I. Audit maintains that the observation is indicative of internal control failure in the organization. Further, the non-reconciliation has made public fund vulnerable to misuse. The management stated that NEF had imposed liquidated damages amounting to Rs 356,370 on the contractor for delay in implementation of work. Management also stated that in order to force the contractor for completion of work, a case had been lodged to encash the performance bond and cheque provided by the company. The management further informed that an FIR had also been registered with FIA against the contractor and other officials responsible for the fraud. The DAC meeting was not convened by the PAO till the time of finalization of this audit report. Audit recommends that action initiated on the inquiry report and its outcome may be provided to Audit for verification(s). 6.4.2.2 Non-appearance of receipt in bank accounts amounting to Rs 1.79 million

In the light of Para 23 of GFR Vol-I, Every government officer should realize fully and clearly that he will be held personally responsible for any loss sustained by government through fraud or negligence on his part and that he will also be held personally responsible for any loss arising from fraud or negligence on the part of any other government officers to the extent to which it may be shown that he contributed to the loss by his own action or negligence. During the audit of Urdu Dictionary Board, Karachi, a report prepared by the Departmental Committee, dated 12.11.2008, was reviewed which indicated that an amount of Rs 988,715 had been found short in employees Contributory Provident Fund and another amount of Rs 800,000 found short in the sale of Lughat (Urdu dictionary) Account respectively. Audit maintains that the observation is indicative of internal control weaknesses in the organization and has made the public fund vulnerable to misuse.

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In its response to the observation, the management stated that the matter regarding Contributory Provident Fund may be kept pending till decision by the authority concerned. As regarding sale of Lughat no discrepancy is apparent and the proceeds were regularly entered and recorded. The reply is not satisfactory in the absence of substantive evidence in support of contention. The DAC meeting was not convened by the PAO till the time of finalization of this audit report. Audit recommends that responsibility be fixed, disciplinary action be initiated against officials responsible for this lapse and record be provided to Audit for review. 6.4.3 6.4.3.1 Irregularity & non compliance Irregular expenditure of Rs 6.4 million on purchase of 4500cc imported used vehicle

According to Rules for the Use of Staff Cars, 1980 No Division shall purchase a staff car unless it has obtained a No Objection Certificate (NOC) from the Cabinet Division and subject to availability the following will be eligible for the use of staff cars in the Central Pool (a) Ministries / Divisions for the use of State Guests, (b) Members of foreign delegations and (c) VIPs visiting Pakistan. Rule 24 (2) of Rules for the Use of Staff Cars, 1980, provides that a Federal Minister is entitled to 1800cc vehicle which will be provided by the Cabinet Division from Central Pool of Cars. Further the rules also provides that cars, jeeps and wagons having engine capacity of more than 2000cc have a life of 8 years or 200,000 kilometers whichever is earlier. According to rule 4 of Public Procurement Rules 2004, procuring agencies, while engaging in procurements, shall ensure that the procurements are conducted in a fair and transparent manner, the object of procurement brings value for money to the agency and the procurement process is efficient and economical. During the audit of Basic Education Community Schools (BECS) project, executed by National Education Foundation (NEF), it was observed that the management purchased a 4500cc Land Cruiser, model 2003, for the Chairman NEF, out of the BECS project funds in April 2010.

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Audit noted that: i) There was no provision in the PC-I for the purchase of subject vehicle. ii) The purchase of seven years old/used vehicle was contrary to principle of value for money under the rules 4 of Public Procurement Rules 2004. iii) The subject vehicle has useful life of only one year under rule 5(b) of Rules for the Use of Staff Cars, 1980. iv) NOC for purchase of vehicle was not obtained from the Cabinet Division. v) The vehicle was acquired for the Chairman, NEF, who is also a Federal Minister and is entitled to have a vehicle from the Cabinet Division. The expenditure incurred from the BECS project fund could have been used for establishing new BECS, which is the core objective of the project. Thus the expenditure of Rs 6.4 million on purchase of Toyota Land Cruiser 4500cc was against the spirit of the PC-I and is considered irregular. The expenditure has put an extra burden on the exchequer. In response to the observation, the management stated that it was decided in the best interest of the organization to purchase the Land Cruiser 4500cc for the use of high dignitaries, foreign delegations, donors as well as Chairman, NEF, out of the project funds. The reply is not tenable in the absence of any reference to the relevant provision of law authorizing this procurement. The DAC meeting was not convened by the PAO till the time of finalization of this Report. Audit recommends that matter be investigated at appropriate level under intimation to Audit besides fixing of responsibility for this lapse and recovery of Rs 6.4 million through auction of the vehicle. 6.4.3.2 Unauthorized payment of advertisement charges - Rs 9.9 million

System of Financial Control and Budgeting, 2006 provides that funds cannot be transferred from development to current expenditure and vice versa. No Ministry / Division (including any autonomous body) shall be authorized to re-appropriate funds from one development scheme to another development scheme.

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The PC-I of Basic Education Community Schools (BECS), executed by National Educational Foundation (NEF) was approved by the ECNEC in March 2007 at a cost of Rs 7,000 million. The PC-I contained a provision for advertisement cost of Rs 2.6 million for creating awareness about non-formal schools over the project period of four years. Audit observed that the management incurred expenditure amounting to Rs 9.9 million on account of advertisement of Education Policy 2009-10 in print media, which was not the purpose of the allocation provided in the PC-I. The subject expenditure on advertizing Education Policy 2009-10 should have been met from the current budget of the Ministry. Audit further observed that the expenditure was in excess of allocation provided in the PC-I for advertisement. Audit holds that by utilizing the project funds on an irrelevant object in excess of allocation, the purpose of allocation in the PC-I was defeated and the objective of creating awareness about the non-formal schools was not achieved. The management replied that NEF incurred the expenditure on the instruction of Education Secretary and Chief Finance & Accounts Officer (CFAO). Audit found the reply as untenable, since violation of rules on the advice of an authority does not justify the violation itself. The DAC meeting was not convened by the PAO till the time of finalization of this audit report. Audit recommends that an inquiry be undertaken and responsibility be fixed, disciplinary action be initiated against officials responsible for this lapse and the amount reimbursed to the project. 6.4.3.3 Unauthorized use of mobile phone facility by the NEF employees - Rs 1.6 million

As per O.M No.2/26/2005-RA-IV dated 11th May, 2009 all officers in BS-20 and below working in the Ministries / Divisions on regular basis are entitled to avail mobile phone facility on public account. During the audit of National Educational Foundation (NEF,) Audit noted that all officers of BPS 16 and above were allowed cell phone facility without any provision in the rules and regulations. Audit further noted that NEF paid an amount of Rs 1.6 million to a cell phone company from March 2008 to June 2010 on this account. The month-wise detail of payment made in this regard is at Annex-5.

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The overpayment of Rs 1.67 million has put an extra burden on the exchequer. In response to the observation, the management stated that the cell phone facility was extended to the officials in compliance to the rule 17 of NEF Employees Rules 2007 duly approved by BOG. Further, Federal Government rules have allowed the facility of mobile telephone to all officers in BS-16 and above in public interest. The reply is not satisfactory as the BOG is not competent to approve rules contrary to general policies and financial rules of the Government without the approval of Finance Division. Further, the facility has only been allowed to Secretariat employees. The DAC meeting was not convened by the PAO till the time of finalization of this audit report. Audit recommends that payment of Rs 1.6 million is unauthorized and should be recovered from the officials concerned under intimation to Audit. 6.4.3.4 Recovery on account of misuse of official vehicles and conveyance allowance - Rs 756,817

Rule 2(x) of Rules for the Use of Staff Cars, 1980 provides that an Entitled Officer means officer of grade 22, 21, & 20 of the Federal Government borne on the sanctioned Establishment of a Division or an Organization under its administrative control. Rule 11 (1) stipulates that only one staff car shall be used both for official as well as private use by an entitled officer. During the review of record of National Educational Foundation (NEF) for the financial year 2009-10, Audit noted that the Managing Director (M.D), NEF, was using two vehicles contrary to his entitlement. One of these vehicles was a Toyota Hilux 2400 cc bearing registration No. GF-191 which is not even entitled to a Federal Minister. Project funds amounting to Rs 300,049 were used to finance the POL expenditure on this vehicle. Audit further noted that as per the terms and conditions of his contract, the M.D availed 270 liters petrol per month and simultaneously drew conveyance allowance amounting to Rs 456,768 during 2009-10. Audit holds that the unauthorized expenditure of Rs 756,817 has put an extra burden on the exchequer.

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In response to the observation, management replied that the project management had to visit the provincial offices and other far-flung areas which require high power vehicle. The reply is not tenable as the contents of the audit observations have not been addressed with any supportive record or provisions of law. The DAC meeting was not convened by the PAO till the time of finalization of this audit report. Audit recommends that unauthorized amount of Rs 756,817 be recovered from the official concerned. 6.4.3.5 Unauthorized and illegal promotion of project employees in NEF

As per definition of civil servant provided in Chapter 1 of Esta Code para 2(1)(b)(ii) a civil servant means a person who is a member of an All-Pakistan Service or of a civil service of the Federation, or who holds a civil post in connection with the affairs of the Federation, including any such post connected with defence, but does not include a person who is employed on contract, or on work-charged basis or who is paid from contingencies. The para 9(1) of Chapter 1 of Esta Code provides that promotion is entitled to a civil servant possessing such minimum qualifications as may be prescribed shall be eligible for promotion to a [higher] post for the time being reserved under the rules for departmental promotion in the service or cadre to which he belongs. This explicitly provides that persons other than civil servants such as employed on contract are neither civil servants nor eligible for promotion. Audit noted that the management of National Educational Foundation (NEF) promoted 17 contract employees of a PSDP Project, namely Basic Education Community Schools (BECS) to positions one or two step above the posts against which they were originally recruited. The detail of these promotions is provided in Annex-6. The financial impact of these promotions could not be worked out as it involved review of records of 17 employees for the last 15 years. Audit is of the view that these employees were recruited purely on contract basis and there was no provision either in their respective contracts or in government rules and regulations for promotions against project posts. Further, these employees were neither originally working against substantive posts nor the posts against which they were promoted were substantive. Since under rules, only an employee recruited against a

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substantive post is eligible for promotion. Therefore Audit holds that these promotions are unauthorized. The un-authorized promotions in the project put an extra burden on the exchequer. In response to the observation, the management stated that promotion of employees mentioned in the observation has been done in the best interest of the project. The project promoted its experienced staff instead of filling the posts through competitive process. This measure has served the cause of project more than the interest of individuals who were upgraded. The reply of the management is not in consonance with the rules and regulations. Audit holds that violation of rules cannot be justified on the grounds of public interest. The DAC meeting was not convened by the PAO till the time of finalization of this audit report. Audit recommends that these promotions be reverted, difference of pay accruing from the unauthorized promotions be calculated and recovered and disciplinary actions be taken against the officials responsible for violation of rules and regulations.

6.4.3.6

Non-deposit of hostel rent into government treasury - Rs 5.61 million

As per para 26 of GFR Vol-I, it is the duty of the departmental Controlling officers to see that all sums due to Government are regularly and promptly assessed, realized and duly credited in the public account. The management of F.G College for Men, H-9, Islamabad, received Rs 5.616 million from the COMSATS on 31.12.2009 as rent of hostel on account of space provided. Audit noted that the management did not deposit the receipt in the Government Treasury in violation of the above rule. The amount was retained in a bank account meant for Student Fund. The non-deposit of receipt in to treasury has deprived government receipt of Rs 5.61 million. No reply was provided by the management.

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The DAC meeting was not convened by the PAO till the time of finalization of this audit report. Audit recommends that the total amount received by the management be deposited into Government treasury and complete record of transactions with COMSATS be provided to Audit. 6.4.3.7 Unauthorized payment of teaching allowance to Associate Professors / Assistant Professors / Lecturers - Rs 3.96 million

As per Finance Division instructions contained in its O.M F.1(5)IMP/2006 dated 24-062006, Teaching Allowance at the prescribed rate is payable to the PTC / CT / B.Ed. teachers. During the scrutiny of record of F.G Commerce College For Women, F-10/3, Islamabad, for the year 2005-06 to 2008-09, Audit observed that management had been paying teaching allowance @ Rs 1000 per month to 7 Professors/Lecturers/Physical Training Instructors(PTIs) along with their monthly salary since 2007. The total payment on this account amounted to Rs 336,000. Audit also observed that the management of other Model Colleges for Girls at Islamabad had also been paying Teaching Allowance to college Lecturers, Associate Professors and Professors since 2007 as per the following detail:
Sr. No. 1 2 3 4 5 6 7 Name of College ICG F-6/2 IMCG F-6/2 IMCG F-7/4 IMCG F-8/1 IMCG I-8/4 IMCG G-10/2 IMCG I-10/4 Total No. of lecturers/ professors 41 24 22 13 9 6 6 Year 2007 to 2009 2007 to 2009 2008 to 2009 2007 to 2009 2008 to 2009 2006 to 2009 2006 to 2009 Amount (Rs) 1,440,000 720,000 220,000 390,000 108,000 570,000 180,000 3,628,000

Audit noted that the subject O.M. of Finance Division explicitly use the word teachers as recipients of this allowance. Audit also noted that PTC / CT and B.Ed. qualification is only relevant to primary, elementary and secondary school teachers and accordingly the payment of Teaching Allowance is only admissible to school teachers, whereas, PTC / CT and B.Ed. qualification does not add value to the academic competence of a college

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Lecturers, Associate Professors and Professors etc. Therefore, the payment of such allowance to the college Lectures / Professor/PTI has not been intended by the Finance Division. Thus, Audit considers all payments made in this regard as unauthorized. In response to the observation, the management replied that clarification is being sought from the competent forum. The reply is evasive and it does not address the irregularity pointed out by Audit. Audit holds that the overpayment of Rs 3.96 million has resulted in an extra burden on the exchequer. The DAC meeting was not convened by the PAO till the time of finalization of this audit report. Audit recommends that amount paid as Teaching Allowance to Lecturers, Associate Professors and Professors may be recovered from the concerned and deposited into Government account. 6.4.3.8 Unauthorized realization of funds of Rs 231.148 million from the students and expenditure amounting to Rs 174.07 million

As per Para-25 of GFR Vol-1, all departmental regulations in so far as they embody orders or instructions of a financial character or have important financial bearing should be made by, or with the approval of, the Ministry of Finance. According to rule 7(1) of FTR all Government receipts should be deposited into Government account and all moneys received shall not be appropriated to meet departmental expenditure. During the scrutiny of accounts of the Islamabad Model Colleges, Audit observed that the management had been collecting student fund, bus fund, admission fund, and prep fund etc. from students since 2005-06. These funds were deposited into bank accounts and expenditure was made from there by drawing cheques. Audit noted that the colleges had no authorization from the government for collection of these funds. As a standard practice in the Federal Government, the institutions, wherein the management is allowed to utilize its receipt, the government budget is sanctioned only to meet the deficit. In such cases, normally there is no unspent balance at the end of financial year. However, in this case, Audit also observed that there had been unspent balances in the bank accounts of the colleges at the close of each financial year.

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The detail of the funds collected and expenditure made by Islamabad Model Colleges during the period under audit is at Annex-7. Audit also observed similar collection of funds by the other F.G Colleges, which is detailed in Annex-7-A. Audit noted that collection of funds by colleges, deposit of these funds in commercial banks, and its utilization is in violation of above quoted government rules and regulations. In response to the observation, management replied that the practice of collecting funds, their deposit in the bank and utilization had been followed in accordance with the directives from the Federal Directorate of Education (FDE) and policy prescribed in Education Code. The reply is not acceptable to Audit as it does not provide any substantive explanation for circumventing the Government rules and regulations. Further, the FDE is not the competent authority for approving creation of funds. Furthermore, the Education Code is a document approved by the DFA, Education, and not by the Regulation Wing of the Finance Division, which has the authority for approving such funds. The unauthorized collection of funds and their utilization has created space for unauthorized actions by management causing a financial burden on the parents of students, contrary to the intention of government. The DAC meeting was not convened by the PAO till the time of finalization of this audit report. Audit recommends that responsibility be fixed for the unauthorized collection and utilization of funds, disciplinary action be initiated against officials responsible, the amount in question be surrendered to the exchequer and complete record be provided to Audit for review. 6.4.3.9 Unauthorized expenditure on civil work - Rs 5.31 million

According to para 192 of GFR Vol -1 When works allotted to a civil department other than the Public Works Department are executed departmentally, whether direct or through contractors, the form and procedure relating to expenditure on such works should be prescribed by departmental regulations framed in consultation with the AccountantGeneral generally on the principles underlying the financial and accounting rules prescribed for similar works carried out by the Public Works Department.

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During the review of accounts of the Islamabad Model Colleges for Boys, Audit noted that the management had been collecting student fund, bus fund, admission fund, and prep fund etc. from students since 2005-06. These funds were deposited into bank accounts and expenditure was made there from to meet the college expenses by drawing cheques. Audit noted that the colleges had no authorization from the government for collection of these funds. Audit noted that out of unauthorized collected funds, the management of Islamabad Model Colleges for Boys incurred an expenditure of Rs 5,305,757 on repair of college building etc. in the financial years 2006-09. The work was awarded by the management, instead of Pak. PWD, to private contractors without preparing the estimates and quantities etc. Audit also noted that the department had no approved departmental regulations for execution of these works. The detail of payment made on account of subject civil works is as under:
S. No. 1 2 3 4 5 6 7 College Islamabad College for Boys, G-6/3 Islamabad Model College For Boys F-11/1 Islamabad Model College For Boys G-11/1 Islamabad Model College For Boys I-10/1 Islamabad Model College For Boys F-7/3 Islamabad Model College for Boys, F-8/4 Islamabad Model College For Boys I-8/3 Total Amount (Rs) 1,364,975 168,106 303,710 444,645 2,416,617 303,852 303,852 5,305,757

The unauthorized collection of funds and their utilization was against the provisions of rule, which created space for unauthorized actions by management. The DAC meeting was not convened by the PAO till the time of finalization of this audit report. Audit recommends that responsibility be fixed for the unauthorized collection and utilization of funds, and disciplinary action be initiated against officials responsible. Moreover complete record be made available to Audit.

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6.4.3.10 Irregular expenditure on purchase of vehicles - Rs 11.064 million As per Cabinet Division OM No.6-7/02-M-II dated 22.07.2005, and rule 12(1) of Public Procurement Rules 2004, new vehicles can be purchased with the approval of Vehicle Committee constituted by the Federal Government under the Chairmanship of Additional Secretary (Exp) Finance Division by inviting open tenders. During the review of accounts of the Islamabad Model Colleges for Boys, Audit observed that the management had been collecting student fund, bus fund, admission fund, and prep fund etc. from students since 2005-06. These funds were deposited into bank accounts and an expenditure of Rs 11,064,000 was made from these accounts to purchase vehicles in violation of quoted rules and regulations. The detail of the expenditure is provided below:
S No. 1 2 3 4 5 6 Name of College IMCB, G-11/1, Islamabad IMCB, I-10/1, Islamabad IMCB, F-7/3, Islamabad IMCB, F-11/3, Islamabad ICCW, F-10/3, Islamabad IMCG, I-10/4, Islamabad Vehicles Hino Bus Hino Bus Hino Bus Suzuki Van Hiace Van APV Suzuki Van Period 2007-08 2007-08 2007-08 2008-09 2006-07 2006-07 Total Amount (Rs) 1,800,000 2,750,000 3,675,000 130,000 1,680,000 1,029,000 11,064,000

The unauthorized collection of funds and their utilization on purchase of vehicle was against the provisions of rule, which created space for unauthorized actions by management. The DAC meeting was not convened by the PAO till the time of finalization of this audit report. Audit recommends that illegally purchased vehicles may be got regularized, responsibility be fixed for the unauthorized collection and utilization of funds, and disciplinary action initiated against officials responsible.

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6.4.3.11 Irregular expenditure due to appointment beyond the age of superannuation Rs 2.35 million As per instructions contained in Establishment Division letter No.7/3/89-OMG-II dated, 28.1.1989, re-employment beyond the age of superannuation in all the cases require the approval of Prime Minister and the instructions shall apply to all attached departments / subordinate offices / corporations etc. The management of National Collage of Arts (NCA), Lahore, re-employed two individuals after age of superannuation. Audit noted that the prior approval of the Prime Minister was not obtained in these cases in violation of quoted instructions of Establishment Division. The detail of these re-employments is mentioned below: Sr. No. 1 2 Name Designation Date of Birth Date of reEmployment Salary per Month (Rs) 50,000 65,000

Syed Shabbir Hussain Mr. Muhammad Arif

Manager Finance Project Director

01.01.1936 20.10.2007 22.09.1947 12.1.2010

Audit noted that these individuals had been paid out of an Endowment Fund. An amount of Rs 2.352 million was paid to these individuals since the date of re-employment. Audit considers these cases of re-employment and expenditure thereon irregular. The unauthorized re-employment was against the provisions of rule and stems from internal control weaknesses in the organization, which created space for unauthorized actions by management. No reply was received from the management. The DAC meeting was not convened by the PAO till the time of finalization of this audit report. Audit recommends that responsibility be fixed, disciplinary action be initiated against officials responsible for this lapse and the posts be filled-in through regular appointment.

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6.4.3.12 Difference in the closing balances of cash book and bank statements - Rs 61.50 million According to Para 89-4-viii of GFR Vol-I the head of the department and A.G (Director Finance in this case) will be jointly responsible for the reconciliation of the accounts maintained by the department. According to para-89(3)(viii) of GFR Vol-I, reconciliation should be made monthly with the treasury/DAO concerned. While reviewing the accounts of the Director, National Education Foundation, Regional Office, Peshawar from 7/2007 to 6/2010, Audit observed that there had been a difference of Rs 61.502 million between the figures appearing in the cash book and bank statements as on 30-6-2010. The detail of this difference is mentioned below:
Account No. Balance as per cash book (Rs) 29,232,691 66,204,373 95,437,064 Balance as per bank statement (Rs) 28,509,261 5,425,149 33,934,410 Difference (Rs) 723,430 60,779,224 61,502,654

1238-4 1012-6 Total

Audit maintains that the observation is indicative of internal control weaknesses in the organization and has created space, which may lead to misuse of funds. No reply was received till finalization of this audit report. The DAC meeting was not convened by the PAO till the time of finalization of this audit report. Audit recommends that reconciliation be made and corrective action taken accordingly under intimation to Audit. 6.4.3.13 Irregular recruitment of 480 non-teaching staff and irregular adjustment of 231 employees against other cadres Recruitment policy for the Federal Services/ Autonomous Bodies/Corporations circulated vide Establishment Division D.O letter No.10(1)/91-CP-I, dated 1-1-1992, provides no Ministry/Division/ Department/Organization shall receive applications for any post unless the vacancies are advertised.

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Para-11 of Services Act, 1973, states that initial appointments to posts in basic pay scales 1 to 15 and equivalent shall be made on the recommendations of the Departmental Selection Committee after the vacancies have been advertised in newspapers. During the review of the list of recruitment of non-teaching staff by Federal Directorate of Education (FDE), Audit noted that there were 480 vacant posts of non-teaching staff in various institutions. The Department made recruitments against these positions from June 2009 to June, 2010 without adopting the laid down procedure. Out of the 480 recruitments made, 231 vacant posts were bartered with equal number of other positions. For instance, 2 lab assistants, 1 PTI and 1 librarian were recruited and adjusted against 19 vacant posts of Upper Division Clerks. The detail of appointments and adjustments against the posts is as under:
Sr. No. 1 2 3 4 5 Appointed as Accountant Assistant Head clerks UDC LDC No. of Appointment 09 04 04 19 143 No. of Posts Adjusted 4 43 Adjusted against the post (s)

6 7

Steno Typist Naib Qasids

03 293

184

2 Lab. Assistant, 1 PTI, 1 Librarian 22 Lab. Assistant, 11 UDC, 2 Lib Asstt:, 1 Steno Typist, 1 Accountant, 2 H/Clerks, 1 Carpenter, 1 Telephone operator, 1 Qari, 1 Care Taker 29 Farash, 50 Chowkidars, 18 S/Worker, 11 Water Man, 24 Lab. Attendant, 5 DMO, 19 Mali, 5 Ayas, 7 Ground Man ,3 Daftri, 8 Conductor, 2 Cook, 1 Tea Boy, 1 Electrician and 1 Bearer -

8 9 10 11

S/Worker B-1 Employee D.M.O Lab Assistant Total

02 01 01 01 480

231

Audit observed that appointments were made in one cadre without having a vacancy and adjusted against other cadre which was also against the appointment / recruitment rules.

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Furthermore, Audit was not provided the complete record of recruitments for review. Audit maintains that in the absence of provision of the above record and violation of laid down appointment procedures, the recruitments and adjustment of posts was carried out in a non- transparent manner which has made the public fund vulnerable to misuse. No reply was received till finalization of this audit report. The DAC meeting was not convened by the PAO till the time of finalization of this audit report. Audit recommends that responsibility be fixed, disciplinary action be initiated against officials responsible for this lapse and record be provided to Audit for review.

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CHAPTER 7

7 7.1

ESTABLISHMENT DIVISION Introduction of Division

The Establishment Division is the administrative arm of the Federal Government, empowered under Schedule I of the Rules of Business 1973 to regulate all matters of general applicability to various Occupational Groups in public service. The business assigned to the Establishment Division as per the Rules of Business includes: 7.2 Fostering excellence in the civil service Providing an equality of opportunity to civil servant Ensuring transparency in appointments, postings and promotions Undertaking governance through institutions and systems Administrative reforms Comments on Budget & Accounts (Variance Analysis)

Grant wise detail of current and development expenditure of Establishment Division is mentioned below: (Figures in Rupees)
Grant Grant Type No 5 6 7 136 Current Current Current Subtotal Development Subtotal Total Original Grant 1,273,378,000 230,458,000 654,273,000 2,158,109,000 3,000,000 3,000,000 2,161,109,000 Supplementary Grant 3,000 10,776,000 4,000 10,783,000 150,841,000 150,841,000 161,624,000 Final Grant 1,273,381,000 241,234,000 654,277,000 2,168,892,000 153,841,000 153,841,000 2,322,733,000 Expenditure 1,183,349,217 238,982,977 642,622,607 2,064,954,801 83,055,637 83,055,637 2,148,010,438 %age Excess / (Saving) Excess/ (Saving) (90,031,783) (7.07) (2,251,023) (0.93) (11,654,393) (1.78) (103,937,199) (4.79) (70,785,363) (46.01) (70,785,363) (46.01) (174,722,562) (7.52)

Audit noted that: There was an overall saving of 7.52 percent amounting to Rs 174.722 million. Savings were attributed to saving in current grants of Rs 103.9 million and in development grants of Rs 70.8 million.

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Saving in grant 9 of Rs 90 million was mainly due to saving of Rs 86.8 million in the function Establishment.

Supplementary grants obtained without careful cash forecasting In order to ensure prudent financial management, Para 13(vii) of System of Financial Control and Budgeting, 2006 states that Ministries / Divisions should be able to anticipate budgetary requirements well ahead of the financial year to which the budget relates and obtain the concurrence of the Finance Division. The Finance Division is expected to decline any request for supplementary grants except in extraordinary circumstances. This document further states that the funds obtained from supplementary grants shall be expended for the purposes for which these have been sanctioned. In current expenditure, demands for supplementary grants shall not be made, except in extraordinary circumstances. During the year, supplementary grants of Rs 161.624 million were obtained which were 7.45% of original allocation. According to Para 71 of General Financial Rules (Volume I), while framing budget estimates, the authorities should exercise utmost foresight. Variation between estimated and actual expenditure captures the level of foresight that goes into budget formulation. As shown in the graph below, the saving in current expenditure was 4.32%, which, after accounting for supplementary grants increased to savings of 4.79%. In development expenditure, excess against original budget was 2668% which changed to saving of 46.01% when supplementary grants were taken into account.

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7.3

Brief comments on the status of compliance with PAC Directives

Years Total No Of Paras Compliance Non-Complied % of compliance 0 0 0 1987-88 0 0 0 1988-89 1 0 1 0% 1989-90 1 1 0 100% 1990-91 0 0 0 1991-92 1 0 1 0% 1992-93 0 0 0 1993-94 2 1 1 50% 1994-95 3 0 1 0% 1995-96 2 2 0 100% 1996-97 0 0 0 1997-98 14 13 1 93% 1999-00 0 0 0 2000-01 0 0 0 2001-02 0 0 0 2006-07 2 0 2 0% 2008-09 Note: The report for the audit years 1998-99, 2002 2006, 2007-08 have not been discussed in the Public Accounts Committee (PAC)

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7.4 7.4.1

AUDIT PARAS Irregularity & non compliance

7.4.1.1 Unauthorized creation of posts of Additional Secretaries in Federal Ministry/Division Para III of Cabinet Committee decision in case No. 125/8/97 dated 4-02-1997, about Revamping of Federal Secretariat, approved the recommendation of a National Commission for retention of tiers in the Federal Secretariat subject to the condition that the provision of the posts of Additional Secretaries should be related to the five (5) posts of Joint Secretaries in a Division. Establishment Division was responsible for implementing the above mentioned decision of Cabinet Committee. Audit noted incumbents against positions of Additional Secretaries in Ministry of Port & Shipping, Ministry of Textile, Ministry of Culture, Ministry of Environment, Ministry of Communications and Ministry of Commerce, etc. Audit further noted that five positions of Joint Secretaries in these Ministries/Divisions were not available. Thus, the placement of Additional Secretaries was in violation of the quoted decision of Cabinet Committee. Audit noted that the non-compliance of the decision of Cabinet Committee had resulted in unauthorized creation of posts of Additional Secretaries, with an extra burden on the exchequer. Audit requested the Establishment Division to respond to the observation and also provide Ministry/Division wise data pertaining to placement of Joint Secretaries and Additional Secretaries. However, no reply was received till finalization of this audit report. The DAC meeting was not convened by the PAO till the time of finalization of this audit report. Audit recommends implementation of the decision of the Cabinet Committee in letter and spirit and rectification of related anomalies.

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7.4.1.2

Non framing of placement criteria for the post of Additional Secretary and Senior Joint Secretary and rules/ policy of nomination /induction

The Establishment Division is the administrative arm of the Federal Government, empowered under Schedule I of the Rules of Business 1973, to, inter alia, regulate all matters of general applicability to various occupational groups in public service. Audit noted some specific instances, indicating absence of laid down and merit-based criteria, due diligence and transparency, in the Establishment Division as detailed in the forthcoming paragraphs. a. Incumbents against posts of Additional Secretary and Senior Joint Secretary in Federal Government were drawing salary and perks and privileges of BS 21. Audit noted, while the post of Additional Secretary is in BS-21, the Senior Joint Secretary actually works against a post of BS-20. However, there is no defined criterion for the posting of Additional Secretary (BS 21) and/or Senior Joint Secretary (BS 21) in Ministries/Divisions. b. The Establishment Division did not frame and notify any criteria for nomination of officers to Staff College/ National Institute of Management (NIM) and proportion of each occupational group in each course. c. The Establishment Division did not hold Section Officers Promotion Examination since 2006. Resultantly, the strength of 665 Section Officers in Ministries/Division, at the time of audit, included 125 retired Deputy Secretaries / Section Officers appointed on contract basis for a period of one year on fixed pay package of Rs 31,500 against 200 vacant posts of Section Officers.

These observations indicate that the Establishment Division is not carrying out its mandate efficiently with particular regard to regulating human resource management in the Federal Government, which may lower motivation of Federal Government employees, leading to work inefficiencies. In response to the observation, the management replied that the Chief Executive in 2001, reserved 1/3rd vacancies of Senior Joint Secretaries for promotion of officers in regular BS-20 of regularly constituted Occupational Groups and Services, who had slim chances of promotion in BS 21 in their own group.

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With its reply, the management did not provide the policy approved by the Chief Executive in 2001 and the approved criteria for promotion of the Senior Joint Secretaries. The DAC meeting was not convened by the PAO till the time of finalization of this audit report. Audit recommends provision of relevant record for review and framing of merit based criteria for: i. Promotion to the position of Senior Joint Secretary. ii. Nomination of officers to Staff College/ NIM and proportion of each occupational group in each course. iii. Holding of Section Officers examination on a regular interval. iv. Distribution of BS-21 vacancies between Additional Secretaries and Senior Joint Secretaries 7.4.1.3 Overpayment of foreign DA to officers on account of hotel charges - Rs 5.250 million (US$ 61,400)

In accordance with para 11 of GFR Vol-I, each head of the department is responsible for enforcing financial order and strict economy at every step. He is responsible for observance of all relevant financial rules and regulations. In terms of Finance Division O.M F.1(10)R.10/2006-745, dated 30.12.2006, the President has revised the rates of daily allowance admissible to officials and other persons while on tours/duty outside Pakistan. Para 2(i) of this O.M states that a category-I officer for whom accommodation in a hotel is not arranged by the Pakistan Embassy concerned and who stays in a hotel under his own arrangement shall, in addition to the daily allowance for category-I, continue to be allowed reimbursement of the actual charges of single room accommodation not exceeding the amount of daily allowance admissible to a category-II officer on production of hotel bills, provided that where no receipt is produced, daily allowance will be admissible as prescribed for category-II officers. In such a situation the concerned officer will be allowed advance of foreign exchange equal to daily allowance of category-I plus category-II and this advance will be adjusted on return of the officer to Pakistan by producing the hotel bills. Similarly in the case of category-II & III officers, 50% of DA meant to cover accommodation and 50% will be admissible on production of hotel receipt/vouchers. Audit noted, during the review of record of National Management College (NMC), Lahore, for the financial year 2009-10, that the participants of the 91st & 92nd National Management Course and faculty of Category-I, II & III, received payment against claims

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of DA on account of foreign visit. However, the record did not include any hotel bill/receipt presented with claims for payment. The management made payments, against the claims, on the basis of procedure applicable in cases where the hotel receipt/bill are produced. This was in violation of Finance Division O.M F.1(10)R.10/2006-745, dated 30.12.2006. Audit held this payment as irregular. Audit assessed that the above mentioned violation of rules in respect foreign study visit of the 91st National Management Course resulted in overpayment of Rs 5,249,672. However, overpayment in case of visit of 92nd National Management Course could not be calculated owing to time constraint. But the management was advised to calculate the amount of overpayment and convey it to Audit. The overpayment of Rs 5.25 million has put an extra burden on the exchequer, which manifests internal control weaknesses in the organization. Management replied that before starting of Foreign Study Tour (FST) all modalities are prepared keeping in view of the prevailing government orders and rates of DA of different countries in different cities. All the participants visiting foreign countries are given advance according to their entitlement, country and city and also duration of the period for stay in that country / countries. However, observation made by the Audit regarding hotel bills / receipt for the period of stay in various countries has been noted for immediate compliance and for such activities in future. The reply is not satisfactory as no detailed working of DA in respect of each claimant along with copies of hotel invoices/paid vouchers have been provided to Audit. The DAC meeting was not convened by the PAO till the time of finalization of this audit report. Audit recommends recovery of overpayment from the participants of the 91st and 92nd National Management Course and faculty officers of Category-I, II and III.

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7.4.1.4

Unjustified payment of NSPP Allowance and Instructional Allowance to Faculty

Para 25 of GFR Vol-I stipulates that all departmental regulations in so far as they embody orders or instructions of a financial character or have important financial bearing should be made by, or with the approval of, the Ministry of Finance. In terms of Finance Division (Regulation Wing) O.M No. F.3(17)-R-2/84 dated 01.07.86, the instructional allowance is admissible to those officers who are actually deployed on instructional duties. The Board of Governors (BoG) of National School of Public Policy (NSPP) in its 3rd meeting held on 26.01.2007 constituted a committee to review the pay package (of its employees) keeping in view the practice in vogue in other similar bodies and boards. Approval of minutes of the committee was to be obtained through circulation from the members of the BOG. Accordingly, the committee, proposed a pay package, which was approved by the Establishment Division vide its letter No.3/7/2007-T-6 dated 05.05.2007. The package included a special NSPP Allowance equal to monthly basic pay (running) to the faculty and 20% of the basic pay (running) per month to all other employees. Audit noted the following observations in the subject case: i. Review of pay package revealed that the pay package was not approved by the Regulation Wing of Ministry of Finance as required under Para 25 of GFR Vol-I. Rather, it was approved by the F.A Wing vide UO No.Dy.87/DFA (Estt)/2007 dated 20.02.2007. ii. The minutes of the committee were required to be circulated among all members of the BOG for approval but no such approval was produced to Audit. iii. In addition to NSPP Allowance, the NSPP and its constituent bodies namely National Management College (NMC) and National Institute of Management (NIM) were paying 20% Instructional Allowance to faculty of NMC, Mid Career Management Course (MCMC) and Senior Management Course (SMC) w.e.f. 29.03.2007. Audit holds that while NSPP Allowance is claimed to be paid as an incentive to employees for the special role of the institution in the capacity building of civil service, there is no justification for allowing Instructional Allowance which is similar in nature and substance.

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Audit maintains that the payment of NSPP Allowance to the faculty is without lawful authority and in violation of Para 25 of GFR Vol-I. This has put an extra burden on the exchequer. In response, the management replied that the Faculty Allowance was approved as an incentive package for attracting quality faculty members for NSPP and was instituted as an allowance over and above the existing pay package, (including all allowances) of government officers. The instructional allowance is admissible to those officers who are deployed on instructional duties. It is an inherent contradiction to say that this should not be extended to the faculty on the plea that faculty is already drawing 100% NSPP allowance equal to one basic pay. It is worth mentioning that 50% increase in salary cannot be extended to the faculty members. The 100% faculty allowance actually stands at 50% now which is in fact only 30% because 20% NSPP allowance is allowed to all officers and officials of NSPP irrespective of their being faculty or not. The reply is not satisfactory as approval of the Finance Division was not obtained. The DAC meeting was not convened by the PAO till the time of finalization of this audit report. Audit recommends that the payment of NSPP Allowance be immediately discontinued and payment made on this account be recovered.

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CHAPTER 8 8 8.1 ELECTION COMMISSION OF PAKISTAN Introduction of Department

Election Commission of Pakistan came into being on 23rd day of March, 1956 when the Second Constituent Assembly succeeded in framing and adopting the first Constitution of Islamic Republic of Pakistan in 1956. Article 137 of the Constitution provided for the Election Commission comprising Chief Election Commissioner/Chairman of the Commission and such number of Election Commissioners as may be determined by the President. First Chief Election Commissioner was appointed on 25th June, 1956. The term of office of the Chief Election Commissioner was five years with upper age limit of 65 years. Election Commission was charged with duties of preparation of electoral rolls, their annual revision and organizing and conducting elections to Assemblies. This Constitution provided for election to National and Provincial assemblies on the adult franchise basis. A separate institution Delimitation Commission was also provided for delimitation of constituencies. The Constitution of Islamic Republic of Pakistan, 1973 provided for an Election Commission consisting of Chairman/Chief Election Commissioner and two Members, who were to be Judges of High Courts. The number of Members of the Election Commission was later raised to four. The 18th Amendment to the Constitution has provided more consultative process of appointment of the Chief Election Commissioner and four Members of the Commission. Their appointment is now to be made on the recommendation of a Joint Parliamentary Committee consisting of sixteen members of the Senate and the National Assembly belonging equally to the Government and the Opposition. Members have to be former Judges of High Courts of the Provinces.

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8.2

Comments on Budget & Accounts (Variance Analysis)

Grant wise detail of current and development expenditure of Election Commission is mentioned below: (Figures in Rupees)
Grant No J Grant Type Charged Total Original Grant 1,161,072,000 1,161,072,000 Supplementary Grant 5,000 5,000 Final Grant 1,161,077,000 1,161,077,000 Expenditure %age Excess / (Saving) Excess/ (Saving) 537,648,099 (623,428,901) (53.69) 537,648,099 (623,428,901) (54)

Audit noted that under Grant J, there was a saving of Rs 623.429 million which was 53.69 percent of the Final Grant. This was mainly due to the savings of Rs 746.181 million in Operating Expenses. According to Para 71 of General Financial Rules (Volume I), while framing budget estimates, the authorities should exercise utmost foresight. Variation between estimated and actual expenditure captures the level of foresight that goes into budget formulation. As shown in the graph below, the saving in charged expenditure was 53.69%, which, after accounting for supplementary grants remained at 53.69%.

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8.3

Brief comments on the status of compliance with PAC Directives

Years Total No Of Paras Compliance Non-Complied % of compliance 0 0 0 1987-88 0 0 0 1988-89 0 0 0 1989-90 1 1 0 100% 1990-91 1 1 0 100% 1991-92 0 0 0 1992-93 0 0 0 1993-94 1 1 0 100% 1994-95 0 0 0 1995-96 2 0 2 0% 1996-97 0 0 0 1997-98 0 0 0 1999-00 0 0 0 2000-01 0 0 0 2001-02 0 0 0 2006-07 0 0 0 2008-09 Note: The report for the audit years 1998-99, 2002 2006, 2007-08 have not been discussed in the Public Accounts Committee (PAC)

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8.4 8.4.1

AUDIT PARAS Irregularity & non compliance Mis-procurement - Rs 237.98 million

8.4.1.1

Under rule 50 of the Public Procurement Rules 2004, any unauthorized breach of these rules shall amount to mis-procurement. Election Commission of Pakistan (ECP) authorities floated Request for Proposal (RFP) on 14.7.2006 for development of Computerized Electoral Roll System (CERS) through voters data repository. The system was required to encompass the data of all eligible Pakistani voters, approximately 72 million. The estimated project cost of Rs 538.959 million was to be financed by USAID through International Foundation for Electoral System (IFES). After due process, a contract valuing Rs 538.959 million, for development of Computerized Electoral Roll System of estimated 53 million voters was awarded to a firm. In August 2007, the ECP identified another 27 million voters to be included in the database. The estimated cost of this additional work was Rs 237,978,997. However, the donor agency i.e. USAID regretted to finance the additional work. Therefore, ECP accessed resources of Government of Pakistan for the additional work. Accordingly, a change order for additional work Phase-II (Supplementary Electoral Rolls) of Rs 237,978,997 was issued to the firm on 31.8.2007. Audit noted the following irregularities in award of work: i) Variation order of Rs 237,978,997 (i.e. 44% of original contract value) was issued to the firm on 31-08-2007, in violation of rule 42 (iv) of Public Procurement Rules 2004, which requires that repeat order should not exceed fifteen percent (15%) of the original procurement. No bank guarantee was obtained from the firm for the additional work assigned to safeguard the advance money. Performance guarantee was not obtained under rule 39 of Public Procurement Rules 2004 and clause 14.3 of the original contract, which states that performance guarantee, shall be secured by means of retaining 10% of the component of contract price for one year after the warranty period commenced.

ii) iii)

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iv)

v)

vi) vii)

viii)

ix)

x)

xi)

Under the new payment schedule, the firm invoiced Rs 107.091 million to ECP on 01-09-2007. This single claim, amounting to 45% of the variation order, seems unusual as it was made immediately after issuance of the change order. A clause relating to late payment charges was incorporated in the original contract but no penalty clause, in case of delayed operationalization of CERS at ECP Secretariat and PECs, was incorporated. Warranty and maintenance terms, under schedule-C of the contract agreement, required to be agreed within one month of signing of agreement, were not made. Intellectual property rights and complete and exclusive ownership of the database, as required under article 17 and 18 of the agreement, were not transferred to ECP till June, 2010. As per clause 16.1 of the contract agreement, maintenance and support services for two years had to be provided by the firm, commencing from the date of delivery of CERS software or till the delivery of the source code of CERS software, whichever occurs earlier. However, the ECP could not provide any evidence in support of receiving these deliverables from the contractor. The firm completed the work of data entry and provided the copies of final (54 million voters) and supplementary (27 million voters) printed voters list. But even after a lapse of two years, neither the developed electoral management system nor the application software developed for CERS project was handed over to ECP. Operationalization of CERS at ECP Secretariat and at all provincial Election Commissions (PECs) had not taken place till the time of Audit. Contrary to this, the ECP authorities issued a certificate of acceptance of deliverables to the contractor on 9.9.2008. The certificate confirmed that CERS project had been successfully designed, developed and deployed at ECP secretariat, all PEC offices and disaster recovery site (PEC Punjab office) to the entire satisfaction of ECP as per agreement between ECP and the firm. Report of third party IT-infrastructure audit, approved by Election Commission authorities to evaluate and ensure the quality of work of Computerized Electoral Rolls System (Application Software, Hardware, Connectivity, Systems, Quality of Data, Databases, Information Security, Training, Documentations and QOS at all level etc), developed and deployed by the firm was not available on record.

Audit also noted that in FY 2000-2001, ECP had also paid Rs 444 million to NADRA for preparation of a similar database of voters and printing of electoral rolls. The payment included approximately Rs 105 million exclusively for development of a database of voters in Pakistan. Audit maintains that instead of creating and developing a new

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database in FY 2008 costing Rs 776.938 million, the database created in FY 2000-2001 should have been updated. Audit further noted that the data of all eligible voters already existed with NADRA and therefore that should have been utilized by ECP to update its database created in 2000 and the development of a new database was a total wastage of resources. The above noted irregularities are in violation of cited rules, and have resulted in extra burden on the exchequer. No reply was received till finalization of this audit report. The DAC meeting was not convened by the PAO till the time of finalization of this audit report. Audit recommends that an inquiry be initiated to investigate in the observations raised by Audit, and responsibility be fixed for the lapses mentioned above.

8.4.1.2

Non-maintenance of stock registers of printing of forms - Rs 60.44 million

Rule 155 of GFR Vol-I provides that a reliable list, inventory or account of all stores in the custody of Government officers should be maintained in a form prescribed by competent authority to enable a ready verification of stores and checking of accounts at any time and transactions must be recorded in it as they occur. Election Commission of Pakistan (ECP) incurred an expenditure of Rs 60.439 million during 2007-09 on printing of different type of forms for conduct of election and preparation of electoral rolls as detailed below:
S. No. 1 2 Years 2007-08 2008-09 Total Amount (Rs) 6,228,639 54,210,624 60,439,263

Audit noted that large quantities of printing forms were issued to Provincial Election Commissions (PECs)/District Election Commissions. However, there was no receipt/issue record in the stock registers of forms previously printed for the same purpose. Similarly, there was no such record of forms received / issued during 2007-09 to

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different offices of Election Commission. The absence of this record is in violation of cited rule. In the absence of requisite inventory record, the actual receipt and issuance of forms cannot be verified and the integrity of related expenditure is not established. In response to the observation, the management replied that In a situation where timely provision of election material is itself a challenging task for ECP Secretariat, the physical receipt and issuance of huge quantity at Secretariat level and maintaining proper inventory and stock register of usable items which were printed/procured for event specific assignment being held at Field level is not practicable. A proper list, cost analysis and approval of the Competent Authority are available in the record and the payments had been made after proper verification of the receipt against verified delivery voucher of the demanded quantity by the PECs. The reply is not satisfactory as no entity is allowed to overlook and bypass the provisions of GFR unless specifically exempted by the Finance Division. The DAC meeting was not convened by the PAO till the time of finalization of this audit report. Audit recommends that an inquiry be held to investigate the matter and present other allied record as an evidence of receipt/issuance of forms. Further, an inventory management system be developed in ECP.

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CHAPTER 9

9 9.1

FATA SECRETARIAT Introduction of Secretariat

Federally Administered Tribal Area (FATA) is strategically located between the Pakistan-Afghanistan border and the settled areas of Khyber Pakhtunkhwa (KP). Under the Constitution, FATA is included among the territories of Pakistan (Article 1). It is represented in the National Assembly and the Senate but remains under the direct executive authority of the President (Articles 51, 59 and 247). Laws framed by the National Assembly do not apply here unless so ordered by the President, who is also empowered to issue regulations for the peace and good governance of the tribal areas. Today, FATA continues to be governed primarily through the Frontier Crimes Regulation 1901. It is administered by Governor of KP in his capacity as an agent to the President of Pakistan, under the overall supervision of the Ministry of States and Frontier Regions. Until 2002, decisions related to development planning in the tribal areas were taken by the FATA section of Planning and Development Department of KP, and implemented by governments line departments. In that year, a FATA Secretariat was set up, headed by the Secretary FATA. Four years later, in 2006, the Civil Secretariat FATA was established to take over decision-making functions, with an Additional Chief Secretary, four secretaries and a number of directors. Project implementation is now carried out by line departments of the Civil Secretariat FATA. The Governors Secretariat plays a coordinating role for interaction between the federal and provincial governments and the Civil Secretariat FATA. FATA Rules of Business 2006 govern the functioning of the FATA Civil Secretariat and its line departments. The development initiatives and allocations in FATA had followed a compartmentalized approach, concentrated around sectoral facilities and benefiting few influential and politically active sections which had deprived large segments of the population from social uplift, and economic empowerment. However, FATA have undertaken surveys for improvement in the development programmes in the region and a Sustainable Development Plan has been developed for FATA to secure the social, economic and ecological well being of FATA promoting a just, peaceful and equitable society where the people can live in harmony, respect and dignity.

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9.2

Comments on Budget & Accounts (Variance Analysis)

Grant wise detail of current and development expenditure is mentioned below: (Figures in Rupees) %age Grant Supplementary Grant Type Original Grant Final Grant Expenditure Excess / (Saving) Excess/ No Grant (Saving) 118 Current 7,585,351,000 2,437,720,000 10,023,071,000 10,833,854,245 810,783,245 8.09 171 Development 12,865,000,000 1,421,534,000 14,286,534,000 9,831,033,040 (4,455,500,960) (31.19) Total 20,450,351,000 3,859,254,000 24,309,605,000 20,664,887,285 (3,644,717,715) (14.99) Audit noted that there was an overall saving of 15 percent amounting to Rs 3,644.717 million which was mainly due to saving of Rs 4,455.5.135 million in development grant that was partly offset by excess expenditure of Rs 810.783 million in current grant. This depicted that funds were demanded in excess while preparing initial budget. Supplementary grants obtained without careful cash forecasting In order to ensure prudent financial management, Para 13(vii) of System of Financial Control and Budgeting, 2006 states that Ministries / Divisions should be able to anticipate budgetary requirements well ahead of the financial year to which the budget relates and obtain the concurrence of the Finance Division. The Finance Division is expected to decline any request for supplementary grants except in extraordinary circumstances. This document further states that the funds obtained from supplementary grants shall be expended for the purposes for which these have been sanctioned. In current expenditure, demands for supplementary grants shall not be made, except in extraordinary circumstances. During the year, supplementary grants of Rs 3,859.254 million were obtained which were 18.5% of original allocation.

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9.3

Brief comments on the status of compliance with PAC Directives

Years Total No Of Paras Compliance Non-Complied % of compliance 0 0 1987-88 0 0 0 1988-89 0 5 1 83% 1989-90 6 0 5 0% 1990-91 5 0 0 1991-92 0 1 1 50% 1992-93 2 0 0 1993-94 0 0 6 0% 1994-95 6 0 0 1995-96 0 0 0 1996-97 0 0 0 1997-98 0 0 2 0% 1999-00 2 0 7 0% 2000-01 7 0 0 2001-02 0 0 7 0% 2006-07 7 0 0 2008-09 0 Note: The report for the audit years 1998-99, 2002 2006, 2007-08 have not been discussed in the Public Accounts Committee (PAC)

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9.4 9.4.1

AUDIT PARAS Fraud/Misappropriation Mis-appropriation in the stock of World Food Program Rs 7.14 million

9.4.1.1

According to GFR 23, every government officer should realize fully and clearly that he will be held personally responsible for any loss sustained by Government through fraud or negligence on his part and that he will also be held personally responsible for any loss arising from fraud or negligence on the part of any other government officer to the extent to which it may be shown that he contributed to the loss by his own action or negligence. Under the project Promoting Safe Motherhood executed by the World Food Program (WFP), aid in kind was provided to the administration of Federally Administered Tribal Areas (FATA), which was distributed among targeted beneficiaries. FATA administration was responsible for the safe custody, fair distribution and fair accounting of the received stores. During the review of monthly progress reports of Promoting Safe Motherhood project, for the financial year 2009-10, Audit observed instances, where the closing balances of edible oil of previous months were not brought forward as opening balances in the next months. Owing to this, a large quantity of edible oil was not included in the stock. The detailed calculation of the missing stock is mentioned below:
Agency Closing balance in month 1937 tins in October 2009 1607 tins in February 2010 174 tins in March 2010 7551 tins in April 2010 Recorded opening balances in next month Nil in November 2009 Nil in March 2010 Nil in April 2010 Nil in May 2010 Total Stock misappropriated in tins 1937 tins 1607 174 7551 Quantity per tins 4.6 kg 4.55 kg 4.55 kg 4.55 kg Liters

Khyber

8,910 7,312 792 34,357 51,371

Audit maintained that the missing stock valuing Rs 7,140,569 (Rs 139 per liter x 51371) had been misappropriated.

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Audit holds that it was the responsibility of the management to ensure the safe custody, fair distribution and fair accounting of the received stores. The observation establishes negligence on the part of management in violation of the cited provision of rule. In response, the management replied that the remaining balance has been taken on stock in the progress reports. A DAC meeting was held on 04-02-2011, which directed to hold an inquiry and investigate the matter. Audit recommends that the matter be investigated, responsibility be fixed upon the officials responsible for the loss and the cost of missing stock be recovered from them.

9.4.2 9.4.2.1

Irregularity & non compliance Award of contracts without competition- Rs 1.95 billion

According to rule 12 (2) of Public Procurement Rules 2004, all procurement opportunities over two million rupees should be advertised on the Authoritys website as well as in other print media or newspapers having wide circulation. The advertisement in the newspapers shall principally appear in at least two national dailies, one in English and the other in Urdu. According to rule 51 of Public Procurement Rules 2004, the provisions of these rules shall have effect notwithstanding anything to the contrary contained in any other rules concerning public procurements provided that the prevailing rules and procedures will remain applicable only for the procurement of goods, services and works for which notice for invitation of bids had been issued prior to the commencement of these rules unless the procuring agency deems it appropriate to re-issue the notice for the said procurement after commencement of these rules. In violation of the above rules, the following departments of FATA awarded contracts without competition on the recommendation of parliamentarians and with the approval of the Political Agent. There was a total expenditure of Rs 1.95 billion against these contracts as detailed below:

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S. No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14

Names of Departments Local Government and Rural Development Department --do---do---do-Directorate of Irrigation and Hydel Power Irrigation Department, Khyber Agency Irrigation Department, Kurram Agency Irrigation Department, North Waziristan Agency Highway Division, Khyber Agency --do-Works and Services Division, Khyber Agency Works and Services Building Division, Bajaur Agency Works and Services Highway Division, Bajaur Agency --do-Total

DAR Para No. 50 51 52 54 62 65 70 73 96 97 106 113 128 129

Amount (Rs) 202,551,148 580,239,480 126,962,239 16,500,000 68,499,000 87,093,000 231,705,000 145,617,000 158,650,000 14,052,000 39,331,000 245,803,000 14,161,000 15,923,000 1,947,086,867

Audit maintains that award of contracts without competition was against cited rules and fell within the definition of mis-procurement. By violating the cited rules, the government was denied the benefit of competitive rates. In response to observation, the management replied that works were awarded to nominated contractors up to Rs 25 million as per direction of the FATA Secretariat dated 10.11.2009. The DAC meeting was held on 04.02.2010. The DAC was not satisfied with the reply and directed that an inquiry be held to investigate the matter. Audit recommends that an inquiry be held to investigate the matter, responsibility be fixed, and disciplinary action be initiated against the officials responsible for this lapse. Further, competitive bidding be ensured in all future contracts.

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9.4.2.2

Non-deduction of Income Tax Rs 15.06 million

According to Section-83 of the Income Tax Ordinance 2001, A company shall be a resident company for a tax year if the control and management of the affairs of the company is situated wholly in Pakistan at any time in the year. According to Section- 2 (41) of the Income Tax Ordinance 2001, permanent establishment in relation to a person, means a place of business through which the business of the person is wholly or partly carried on, and includes a place of management, branch, office, factory or workshop, other than a liaison office except where the office engages in the negotiation of contracts (other than contracts of purchase); OR any substantial equipment installed, or other asset or property capable of activity giving rise to income. During the scrutiny of record of following offices of FATA for the financial year 200910, Audit observed that Withholding Tax was not deducted from firms established in settled area. The detail of cases, where Withholding Tax was not deducted is mentioned below:
S. No. 1 2 3 4 5 6 7 8 Names of Departments Directorate of Health Services Local Government and Rural Development Department Irrigation Division Kurram Agency Highway Division Khyber Agency Works and Services Division Khyber Agency Works and Services Division Bajaur Agency Works and Services Division, south Waziristan Agency FATA Rural Development Project Total DAR Para No. 28 49 72 101 109 127 149 200 Amount (Rs) 207,981 131,400 299,625 12,019,000 1,243,000 29,418 15,917 1,115,040 15,061,381

Audit notes that non-deduction of Withholding Tax deprived the exchequer of its receipt. In response to observation, the management stated that contractors were exempted from Income Tax. The DAC meeting was held on 04.02.2010. The DAC was not satisfied with the reply and directed that Income Tax should be recovered from the contractors of the province and those contractors who also have business/ business offices in settled area. Audit recommends that recovery of tax be initiated from the contractors concerned.

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9.4.2.3

Unverified payments- Rs 31.68 million

According to rule 205 of FTR, a Government officer entrusted with the payment of money shall obtain for every payment he makes, a voucher setting forth full and clear particulars of the claim and all information necessary for its proper classification and identification in the accounts. Every voucher must bear an acknowledgement of the payment signed by the person, by whom the claim is put forward. The acknowledgement shall be taken at the time of payment. While scrutinizing the accounts of Highway Division, Khyber Agency for the year 200910, Audit observed that Rs 31.68 million were paid to Political Agent, Khyber Agency, on account of Tribal Commission, for different works underway in the Agency. However, land award statement and Actual Payee Receipt (APR) of the land owners were not available on record. In the absence of this record, the payment is not verifiable. The detail of disbursement to the Political Agent is given below:
Name of work BT of road from Jared to Landi Kotal phase - I 10 km ADP 500 Construction and BT of 20 Kms road in KA Phase I (14 km) ADP 512 BT of road in choora valley 10km ADP 506 Construction and BT of road from Jared to Mullagori (17km) from km 23-39 from Lowera Miana to Azam Banda KA ADP 509 Construction and BT of road from Jared to Mullagori (17km) from km 23-39 from Lowera Miana to Azam Banda ADP 509 Construction of shingled road from Mathra to Serai Kandow ADP 498 Construction of shingled road from Mathra to Serai Kandow ADP 498 Construction and BT of Road Zawa (10kms) Construction and BT of road from Jared to Mullagori (17km) from km 23-39 from Lowera Miana to Azam Banda ADP 509 Improvement / Widening and BT of road from Takhta Baig to Mattani via Bara bypass and Sheikhan (30 kms) ADP 510 -doTotal Voucher no and date 7k dated 17.10.09 21B dated 19.12.09 4J dated 28.11.09 10J dated 17.12.09 5k dated 5.5.10 53B dated 25.6.10 54B dated 25.6.10 55B dated 25.6.10 6k dated 14.6.10 7k dated 14.6.10 16k dated 25.6.10 Amount (Rs) 2,476,882 3,500,000 1,436,682 5,500,000

1,457,000 2,693,285 1,417,857 1,500,000 5,800,760 4,920,000 973,000 31,675,466

Audit maintains that the absence of essential record has created the possibility of misuse and leakages in public funds.

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In response, the management replied that political authorities had been requested to provide APR and same will be provided for verification to Audit. The reply is not satisfactory. It was the responsibility of the management to maintain the record. The reply seems to be evasive. No DAC meeting was convened by the PAO till finalization of this Report. Audit recommends that actual payees receipts from land owners along with ownership documents may be produced to Audit as a proof of actual payment to the genuine payees.

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CHAPTER 10

10 MINISTRY OF FOOD AND AGRICULTURE 10.1 Introduction of Ministry Agriculture is the mainstay of Pakistans economy therefore it is recognized as the engine of national economic growth and poverty reduction. Nearly 21% of total output (GDP) and 43.4% of total employment was generated in agriculture sector during 2006-07. Agriculture also contributes to growth as a supplier of raw materials to industry as well as market for industrial products. 66% of countrys population living in rural areas is directly or indirectly linked with agriculture for their livelihood. Whatever happens to agriculture is bound to affect not only the countrys growth performance but to a large segment of the countrys population as well. The Ministry is mainly responsible for policy formulation, economic coordination and planning. Major functions of the Ministry include: Procurement of food grains and fertilizer Import price stabilization of agriculture produce International liaison Economic studies for framing agricultural policies Activities relating to aid/assistance being received from the donor agencies Collection and compilation of agriculture statistics Marketing intelligence and standardization of agricultural machinery. Identification of under-developed areas and precautionary measures to remove the causes of under-development of different areas

This division has eight attached departments, five Autonomous Bodies and one Corporation i.e. Pakistan Agriculture Storage and Corporation.

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10.2 Comments on Budget & Accounts (Variance Analysis) Grant wise detail of current and development expenditure is mentioned below: (Figures in Rupees)
Grant No 48 49 50 152 153 Grant Type Original Grant Supplementary Grant 8,127,923,000 235,000,000 2,000 8,362,925,000 24,000 24,000 8,362,949,000 Final Grant Expenditure %age Excess / (Saving) Excess/ (Saving) 1,280,974,204 15.30 (28,518,261) (2.15) (4,979,372) (0.98) 1,247,476,571 12.22 (9,296,800,684) (54.61) (605,585,154) (63.61) (9,902,385,838) (55.08) (8,654,909,267) (30.71)

Current 245,157,000 Current 1,092,952,000 Current 506,274,000 Subtotal 1,844,383,000 Development 17,024,980,000 Development 952,000,000 Subtotal 17,976,980,000 Total 19,821,363,000

8,373,080,000 9,654,054,204 1,327,952,000 1,299,433,739 506,276,000 501,296,628 10,207,308,000 11,454,784,571 17,025,004,000 7,728,203,316 952,000,000 346,414,846 17,977,004,000 8,074,618,162 28,184,312,000 19,529,402,733

Audit noted that there was an overall saving of Rs 8,654 million, which was mainly due to saving of Rs 9,902 million in development grant that was offset by excess expenditure of Rs 1,247 million in current grant. Supplementary grants obtained without careful cash forecasting In order to ensure prudent financial management, Para 13(vii) of System of Financial Control and Budgeting, 2006 states that Ministries / Divisions should be able to anticipate budgetary requirements well ahead of the financial year to which the budget relates and obtain the concurrence of the Finance Division. The Finance Division is expected to decline any request for supplementary grants except in extraordinary circumstances. This document further states that the funds obtained from supplementary grants shall be expended for the purposes for which these have been sanctioned. In current expenditure, demands for supplementary grants shall not be made, except in extraordinary circumstances. During the year, supplementary grants of Rs 8,362 million were obtained which were 44% of original allocation. According to Para 71 of General Financial Rules (Volume I), while framing budget estimates, the authorities should exercise utmost foresight. Variation between estimated and actual expenditure captures the level of foresight that goes into budget formulation. As shown in the graph below, the excess in current expenditure was 521.06%, which, after accounting for supplementary grants decreased to 12.22%. In development expenditure, savings against original budget was 55.08% which changed to 55.08% when supplementary grants were taken into account.

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10.3 Brief comments on the status of compliance with PAC Directives

Years Total No Of Paras Compliance Non-Complied % of compliance

17 15 2 88% 1987-88 11 8 3 73% 1988-89 9 4 5 44% 1989-90 4 2 2 50% 1990-91 19 2 17 11% 1991-92 23 5 18 22% 1992-93 31 31 0 100% 1993-94 6 0 6 0% 1994-95 14 0 14 0% 1995-96 65 0 65 0% 1996-97 0 0 0 1997-98 25 1 24 4% 1999-00 54 10 44 19% 2000-01 11 5 6 45% 2001-02 1 0 1 0% 2006-07 2 0 2 0% 2008-09 Note: The report for the audit years 1998-99, 2002 2006, 2007-08 have not been discussed in the Public Accounts Committee (PAC)

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10.4 AUDIT PARAS 10.4.1 Fraud/Misappropriation 10.4.1.1 Fraud amounting to Rs 1.36 million According to Para 23 of GFR Vol.-I, every government officer should realize fully and clearly that he will be held personally responsible for any loss sustained by the government through negligence or fraud. During the review of record of Pakistan Central Cotton Committee (PCCC), Karachi, Audit noted that an amount of Rs. 9.6 million was paid in advance to the owner of a building on account of rental charges of office accommodation for a period from July 2008 to June 2009. However, a separate cheque bearing # 247009, dated 05.07.2008 amounting to Rs 1,362,500 was also prepared for depositing the amount of Withholding Tax with the Income Tax, Department. However, instead of handing over the cheque to the Income Tax Department, the cashier, forged the signature of Secretary, PCCC and converted the cheque in to pay order # 455210, dated 15.07.2008 in favor of a private firm. Audit also noted that the amount of Rs 1,362,500 was in excess of 6 percent mandatory Withholding Tax required to be deducted from the total payment made to the owner of the rented house. However, there was no explanation available on the record in this regard. After a month of committing the fraud, the cashier absconded from his duty on 20.08.2008. The management remained unaware of the fraud. Surprisingly, the case was not reported to the police / FIA even after a lapse of more than one year. The ignorance of the management to the imperatives of oversight and its disregard of internal controls constitute violation of the cited rules, which resulted in loss to the government. The management did not respond to the observation till issuance of the report. No DAC meeting was convened by the PAO till finalization of this Report. Audit recommends that an inquiry be held to investigate the matter, responsibility be fixed on those who did not report the matter to police and the matter be taken up with FIA/Police for further investigation and recovery thereof.

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10.4.2 Performance 10.4.2.1 Loss of Rs 1.51 million on account of 4.7 metric tons of expired seeds and recovery thereof According to para 148 of GFR all materials received should be examined, counted, measured or weighed as the case may be, when delivery is taken, and they should be taken in charge by a responsible Government officer who should see that the quantities are correct and their quality good, and record a certificate to that effect. The officer receiving the stores should also be required to give a certificate that he has actually received the materials and recorded them in the appropriate stock register. During the review of record of Pakistan Oilseed Development Board (PODB) Balochistan Quetta, Audit noted that the management incurred an expenditure of Rs 2,563,200 on 12.11.2004 for the purchase of eight metric tons of sunflower seeds from a supplier. The seeds were received in November, 2004. However, out of 08 metric tons only 3.3 metric tons were issued to the farmers of Balochistan on credit. While 4.7 Metric tons of seed remained unsold after the feedback that the seeds were of very low quality and could not be used. Owing to this, the sale of seeds was stopped. Thus, the low quality and defective seed valuing Rs 1,505,880 remained stored and rotted. Audit maintains that the management did not examine the quality of seed at the time of receiving the stock. Further it did not make efforts to recover the amount of defective supply from the contractor, which was in violation of cited rule. This resulted in financial loss to the exchequer and reputational loss to PODB. The management in its reply stated that 3.3 metric tons was sold to farmers and 4.7 metric tons remained unsold due to unsatisfactory performance in the field. This was reported to higher management and the firm which agreed to replace the defective seeds with another variety. Sale was stopped in 2005 due to very poor performance of seed in light of decision made by PODB headquarter in consultation with the firm. However, matter has not been resolved so far. The reply is not satisfactory as no effective measures were taken to replace the defective seed or recover the amount since 2005. No DAC meeting was convened by the PAO till finalization of this Report.

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Audit recommends that an inquiry be held to investigate the matter, responsibility be fixed, and disciplinary action be initiated against the officials responsible for this lapse. Further, the amount equivalent of defective seed be recovered from the contractor. 10.4.2.2 Imprudent expenditure on import of oil palm seedlings- US $ 156,000 According to Para 10 of GFR Vol-1, every officer incurring or authorizing expenditure from public funds should be guided by high standards of financial propriety and every public officer is expected to exercise the same vigilance in respect of expenditure incurred from public moneys as a person of ordinary prudence would exercise in respect of expenditure of his own money. During the audit of Oil Palm Development Project, under the Pakistan Oilseed Development Board (PODB), Karachi, Audit noted that the project management failed to commission the oil palm extraction mill bought at a cost Rs 49.734 million with the crushing capacity of 10 tons per day. Despite the non-commissioning of this mill, PODB contracted a firm for import of 300,000 seedlings (@ US $ 0.52) costing US $ 156,000 with the completion period of eight months starting in May 2009. Audit noted that due to non-installation of extraction mill, the confidence of farmers / growers had shaken and they were no more interested to maintain the palm trees at their agriculture lands. This resulted in reduction of the area of oil palm plantation from 2,260 acres to 1,490 acres. In the absence of oil extraction mill and interest of growers, the management instead of salvaging the plantation already made at different places and convincing the growers not to destroy the oil palm plantation, ordered import of 300,000 seedlings. Audit further noted that the area already under plantation was sufficient for the crushing requirement of 10 tons oil extraction mill. In view of above, Audit holds that the expenditure incurred on purchase of oil palm seedlings was a wasteful investment and in violation of cited rule. The management was requested to clarify the position but no reply was received till the date of the issuance of the Report. No DAC meeting was convened by the PAO till finalization of this Report. Audit recommends that an inquiry be held to investigate the matter, responsibility be fixed, and disciplinary action be initiated against the officials responsible for unnecessary purchase of seedlings.

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CHAPTER 11

11 FINANCE DIVISION

11.1 Introduction of Division The Finance Division deals with the subjects pertaining to finance of the Federal Government and financial matters affecting the country as a whole, preparation of annual budget statements and supplementary/excess budget statements for the consideration of the parliament, accounts and audits of the Federal Government Organization etc. as assigned under the Rules of Business, 1973. Moreover, the Finance Division maintains financial discipline through Financial Advisors Organization attached to each Ministry/Division etc. The mission of Finance Division is to pursue sound and equitable economic policies that put Pakistan on the path of sustained economic development and macroeconomic stability with a view to continuously and significantly improving the quality of life of all citizens through prudent and transparent public financial management carried out by dedicated professionals. The following functions were assigned to the Finance Division under the Rules of Business, 1973: 1. Finances of the Federal Government and financial matters affecting the country as a whole 2. The Annual Budget Statement and the Supplementary and Excess Budget Statements to be laid before the National Assembly, the schedules of authorized expenditure 3. Accounts and audit 4. Allocation of share of each Provincial Government in the proceeds of divisible Federal Taxes, National Finance Commission 5. Public debt of the Federation both internal and external borrowing money on the security of the Federal Consolidated Fund 6. Loans and advances by the Federal Government 7. Sanctions of internal and external expenditure requiring concurrence of the Finance Division 8. Advice on economic and financial policies, promotion of economic research 9. Proper utilization of the country's foreign exchange resources

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10. Currency, coinage and legal tender, Pakistan Security Printing Corporation and Pakistan Mint 11. Banking investment, financial and other corporations that is to say: i) Central Banking, State Bank of Pakistan ii) Other banking (not including co-operative banking) and investment and financial corporations with objects and business not confined to one Province iii) Incorporation, regulation and winding up of corporations including banking, insurance and financial corporations not confined to or controlled by or carrying on business in one Province Company Law: Accountancy, Matters relating to the Partnership Act.1932 Investment policies: Capital Issues (Continuance of Control) Act. 1947; statistics and research work pertaining to investment and capital Stock Exchanges and future markets with objects and business not confined to one Province: Securities Regulations Financial settlement between Pakistan and India and division of assets and liabilities of the Pre-Independence Government of India Framing of rules on pay and allowances, retirement benefits, leave benefits and other financial terms & conditions of service Cost Accountancy International Monetary Fund State lotteries Competition Commission of Pakistan and anti Cartel Laws

12. 13. 14. 15. 16. 17. 18. 19. 20.

The attached wings and departments of Finance Division are: ATTACHED WINGS Administration Wing Quality Assurance Wing Budget Management Corporate Oversight Expenditure Management Management of Provincial Finance Policy Wing Pay & Pension Reforms Internal Finance Sector Investment Wing Development Wing Prime Ministers Special Program Wing Finance Division (Military)

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ATTACHED DEPARTMENTS Although office of the Auditor-General of Pakistan has been categorized as an attached department, it has been empowered to exercise the administrative and financial powers of a Ministry / Division vide Finance Divisions O.M. No.F.5(17)/Exp.II/85-423, dated 14.04.1987 Office of the Controller General of Accounts Central Directorate of National Savings (CDNS) Pakistan Mint Securities & Exchange Commission of Pakistan

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11.2 Comments on Budget & Accounts (Variance Analysis) Grant wise detail of current and development expenditure of Finance Division is mentioned below: (Figures in Rupees)
Grant No 35 36 39 40 41 42 132 133 148 149 150 E F G Grant Type Original Grant Supplementary Grant Final Grant Expenditure %age Excess / (Saving) Excess/ (Saving) (69,543,220) (8.51) 143,812,387 8.06 60,275,158 1.33 (2,750,533,491) (3.23) (568,202,000) (0.69) (39,141,875,399) (8.15) (3,707,538,127) (20.27) (1,734,046,326) (3.35) (47,767,651,018) (6.59) (14,067,579,326) (51.40) (50,503,119,580) (54.04) (69,738,977,204) (76.24) (134,309,676,110) (63.26) 2,092,176 0.13 (6,715,376,110) (1.13) (460,513,698,234) (11.75) (467,226,982,168) (10.34) (649,304,309,296) (11.90)

Current 698,458,000 118,816,000 817,274,000 747,730,780 Current 1,583,234,000 200,002,000 1,783,236,000 1,927,048,387 Current 2,575,376,000 1,940,001,000 4,515,377,000 4,575,652,158 Current 69,762,982,000 15,322,274,000 85,085,256,000 82,334,722,509 Current 52,900,000,000 29,504,737,000 82,404,737,000 81,836,535,000 Current 274,167,497,000 206,280,332,000 480,447,829,000 441,305,953,601 Current 12,121,694,000 6,167,394,000 18,289,088,000 14,581,549,873 Current 16,406,642,000 35,363,120,000 51,769,762,000 50,035,715,674 Subtotal 430,215,883,000 294,896,676,000 725,112,559,000 677,344,907,982 Development 27,364,559,000 4,867,000 27,369,426,000 13,301,846,674 Development 73,140,911,000 20,320,457,000 93,461,368,000 42,958,248,420 Development 87,116,610,000 4,351,961,000 91,468,571,000 21,729,593,796 Subtotal 187,622,080,000 24,677,285,000 212,299,365,000 77,989,688,890 Charged 1,540,718,000 40,067,000 1,580,785,000 1,582,877,176 Charged 576,770,100,000 19,016,400,000 595,786,500,000 589,071,123,890 Charged 3,916,564,640,000 2,900,000,000 3,919,464,640,000 3,458,950,941,766 Subtotal 4,494,875,458,000 21,956,467,000 4,516,831,925,000 4,049,604,942,832 Total 5,112,713,421,000 341,530,428,000 5,454,243,849,000 4,804,939,539,704

Audit noted that there was an overall saving of 11.9 percent amounting to Rs 649,304.31 million, which was mainly due to savings in Grant G of Rs 460,513.7 million pertaining to Domestic Loans Repayment. Supplementary grants obtained without careful cash forecasting In order to ensure prudent financial management, Para 13(vii) of System of Financial Control and Budgeting, 2006 states that Ministries / Divisions should be able to anticipate budgetary requirements well ahead of the financial year to which the budget relates and obtain the concurrence of the Finance Division. The Finance Division is expected to decline any request for supplementary grants except in extraordinary circumstances. This document further states that the funds obtained from supplementary grants shall be expended for the purposes for which these have been sanctioned. In current expenditure, demands for supplementary grants shall not be made, except in

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extraordinary circumstances. During the year, supplementary grants of Rs 341,530.43 million were obtained which were 6.67% of original allocation. COMPOSITION OF ACTUAL EXPENDITURE: The composition of actual expenditure of Finance Division depicted that actual expenditure mainly comprised Charged portion which accounted for 84.28 percent of Finance Divisions actual expenditure. The composition of actual expenditure is as follows:

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11.3 Brief comments on the status of compliance with PAC Directives

Years Total No Of Paras Compliance Non-Complied % of compliance 0 0 0 1987-88 0 0 0 1988-89 4 2 2 50% 1989-90 1 1 0 100% 1990-91 7 6 1 86% 1991-92 12 12 0 100% 1992-93 7 7 0 100% 1993-94 5 0 5 0% 1994-95 1 0 1 0% 1995-96 2 2 0 100% 1996-97 0 0 0 1997-98 0 0 0 1999-00 20 5 5 25% 2000-01 0 0 0 2001-02 5 0 5 0% 2006-07 5 0 5 0% 2008-09 Note: The report for the audit years 1998-99, 2002 2006, 2007-08 have not been discussed in the Public Accounts Committee (PAC)

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11.4 AUDIT PARAS 11.4.1 Non production of record 11.4.1.1 Non-production of record by Finance Division - Rs 3.5 billion In terms of Section 14 of the Auditor-Generals Ordinance 2001 and Para-17 of GFR Vol-I, it is the duty of every Department/Controlling Officer to afford all reasonable facilities to the Audit in the discharge of their duty and to furnish the fullest possible information which they may ask for in connection with the preparation of an account or report which it is their duty to prepare. No information or book should be withheld, which is the statutory right of the Audit to see on behalf of the Auditor-General of Pakistan. During the audit of Ministry of Finance, the management was requested to provide paid vouchers pertaining to the funds placed at the disposal of State Bank of Pakistan for the financial year 2009-10. The detail of disbursements and expenditure pertaining to these vouchers is detailed below:
S # 1 Letter No. & Date F.4(7)/CFIII/2005 dated 29-10-09 Subject For the disbursement against approved schemes of the relevant beneficiaries in consultation with Ministry of Textile Industry on case to case basis and approved procedure of disbursement by competent forum For Clearing pending claims on account of PTA For disbursement to the relevant beneficiaries against their claims in accordance with the provision of SRO dated 1st March 2008 issued by the Ministry of Commerce Total Rs FD Amount (Budget)Rs 5,000,000,000 SBP Amount (Expenditure)Rs 3,194,515,731

F.5(11)/CFIII/2008 dated 05-10-2009 F.3(10)/CFIII/2008 dated 16-10-2009

250,000,000

250,000,000

25,000,000

20,470,424

3,464,986,155

Audit noted that the management did not provide the record in violation of cited rules. Non production of record limited the scope of auditor and impeded the process of accountability and transparency.

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In response to the observation, the management replied that the scheme/policy is concerned with the Ministry of Textile and Finance Division does not have any record of such kind of vouchers. The reply is not cogent as it is the responsibility of the Ministry of Finance to ensure maintenance of relevant record of all disbursements, which it makes or authorizes the SBP to disburse. The DAC meeting was not convened by the PAO till the time of finalization of this audit report. Audit recommends that responsibility be fixed, disciplinary action be initiated against officials responsible for this lapse under relevant Efficiency and Discipline Rules as required under Section 14(3) of Auditor-General's (Functions, Powers and Terms and Conditions of Service) Ordinance, 2001 and record be provided to Audit for review. Further, Audit also recommends that the management make appropriate arrangements for keeping proper auditable record, and initiate steps to streamline the disbursements. Non production of record of use of vehicles 6.35 million

11.4.1.2

In terms of Section 14 of the Auditor-Generals Ordinance 2001 and Para-17 of GFR Vol-I, it is the duty of every Department/Controlling Officer to afford all reasonable facilities to the Audit in the discharge of their duty and to furnish the fullest possible information which they may ask for in connection with the preparation of an account or report which it is their duty to prepare. No information or book should be withheld, which is the statutory right of the Audit to see on behalf of the Auditor-General of Pakistan. Rule 2(x) of Rules for the Use of Staff Cars 1980 provides that Entitled Officers me ans officers of grade 22, 21, & 20 of the Federal Government borne on the sanctioned establishment of a Division or an Organization under its administrative control. Rule 11and 11 (1) stipulates that only one staff car shall be used both for official as well as private use by an entitled officer. During the review of record of Ministry of Finance, Audit noted that the Ministry had been maintaining 72 vehicles against 38 entitled officers. Thus the Ministry had maintained 34 excess vehicles. Out of the 72 vehicles, movement registers of 44 vehicles

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were not produced to Audit in violation of Para 17 of GFR Vol-I and section 14 of the Auditor-Generals Ordinance 2001. Audit further noted that there was an expenditure of Rs 6,353,825 incurred on repair and POL in respect of these vehicles. Audit is of the view that Ministry of Finance purchased and maintained vehicles in excess of its allocable limit. This additional expenditure put an extra burden on the exchequer. Further, the use of these vehicles for official purposes could not be verified in the absence of record. In response to the observation, the management replied that the movement registers are with General Branch. The reply is evasive and only purports to buy time. The relevant record should have been provided, to Audit, along with the reply. The DAC meeting was not convened by the PAO till the time of finalization of this audit report. Audit recommends that responsibility be fixed, disciplinary action be initiated against officials responsible for this lapse under relevant Efficiency and Discipline Rules as required under Section 14(3) of Auditor-General's (Functions, Powers and Terms and Conditions of Service) Ordinance, 2001 and record be provided to Audit for review.

11.4.2 Irregularity & non compliance 11.4.2.1 Unauthorized expenditure on account of entertainment - Rs 5.17 million Item No.9(38) (i) (ii) of Systems of Financial Control and Budgeting 2006 provides for light refreshment not exceeding Rs 30 per head at a meeting convened for official business. The expenditure on receptions, lunches and dinners up to Rs 40,000 in each case, may be incurred by Ministries/Divisions subject to the condition that per head expenditure including taxes and soft drinks etc should not, in any case, exceed Rs 1200. Item No.9(38) (iii) provides for serving lunch boxes to participants, not exceeding Rs 200 per head, in meetings which are beyond office hours.

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Audit noted that the Finance Division incurred an expenditure of Rs 5,174,738 on account of entertainment during the year 2009-10 as per the following detail:

S# 1 2 3 4 5 6 7 8 9 10 11 12

Office Federal Minister/ Advisor Minister of State Parliamentary Secretary Finance Secretary Special Secretary Finance Additional Finance Secretary (Expenditure) Additional Finance Secretary (HRM/IGF) Additional Finance Secretary (EF-P) Principal Economic Advisor DG (Debt) Officers and staff Others Total

Amount (Rs) 213,200 85,190 32,220 93,600 96,660 35,880 49,772 33,540 31,332 20,660 2,940,975 1,541,709 5,174,738

Audit observed that: i. ii. iii. iv. There was no record of any scheduled meeting held on the dates for which claims for payment on account of entertainment were submitted. There were no lists of participants available in the record. The bills were in the names of officers instead of Ministry of Finance. The claims were neither verified by the Section Officer (General) nor by the officers concerned.

Owing to the above reasons, Audit could not verify adherence to prescribed per head ceiling. Thus, Audit maintains that the expenditure of Rs 5,174,738 was incurred in violation of cited rules. The observation is indicative of lack of proper documentation required to prove the authenticity of such transactions. In response to the observation, the management replied that Finance Division (Main) is a huge organization where daily half a dozen meetings are held, which are often prolonged. Therefore, the light refreshment/lunch/dinners were served. Due to austerity measure

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copies of the notices of the meetings have not been retained. All the claims are verified by the personal staff of officer concerned and if sometimes any bill is left it is human error. Finance Division has been trying its level best to keep expenditure to the minimum. The reply is not acceptable as it only purports to justify the absence of record. Further, the austerity drive does not prohibit use of paper for maintenance of essential record. The DAC meeting was not convened by the PAO till the time of finalization of this audit report. Audit recommends that the subject expenditure be recovered from the officers concerned. 11.4.2.2 Absence of an investment policy The Rules of Business 1973 define the following functions of Finance Division: i. ii. iii. iv. Finances of the Federal Government and financial matters affecting the country as a whole. Advice on economic and financial policies; promotion of economic research. Banking, investment, financial and other corporations. Investment policies: Capital issues (Continuance of Control) Act, 1947; statistics and research work pertaining to investment and capital.

Para 2.3.2.2 of Accounting Policy and Procedures Manual states that the information in the accounts and the supporting subsidiary records shall be accurate, representing the actual substance of past events, without undue errors or omission. This shall include correct and consistent classification of transactions and the recognition of revenues and expenditures in the correct time period. Audit noted that Ministry of Finance, made investments under Grant No.132Miscellaneous Investment by Federal Government in 2009-10. In order to verify whether the investments were made in the light of any established policy, the Ministry was requested to provide a copy of the investment policy of Federal Government. However, no such policy was provided to Audit. Audit is of the view that under the Rules of Business 1973, it is the responsibility of Ministry of Finance to frame appropriate policy relating to investment. In the absence of any approved policy Audit was not in a position to offer comments on the prudence of the investments made by the Ministry.

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In response to the observation, the management replied that after constitution of Investment Division / Board of Investment (BOI), Investment Policy is a subject of Investment Division. The reply is evasive. It explicitly indicates that Finance Division, which invests public funds, has never realized the need for any such policy. The reply only amounts to shifting of responsibility. Further, the responsibility of a ministry as provided in the Rules of Business could not be expected from another ministry. The DAC meeting was not convened by the PAO till the time of finalization of this audit report. Audit recommends that the Ministry of Finance needs to develop and implement an investment policy in order to secure public funds by identifying different alternatives available to mitigate risk involved in investments. 11.4.2.3 Non-maintenance of proper record of investment Para 17 of GFR Vol-I states that it is the duty of every departmental and Controlling officer to see that the Audit is afforded all reasonable facilities in the discharge of his functions and furnished with the fullest possible information for which it may ask, for the preparation of any account or report, which is its duty to prepare. Audit noted, that Ministry of Finance, made investments under Grant No.132Miscellaneous Investment by Federal Government in 2009-10. With a view to scrutinize the funds invested, the management was requested to provide the relevant record. In response, the management replied that other stakeholders would be consulted to develop auditable record for investment of GOP. The reply is not cogent as it is the responsibility of the management to maintain auditable record for all financial transactions. It seems that no due care was accorded to this imperative. The reply implies as the Ministry was not cognizant of the fact that record is the most important tool to track all investments by the government. The DAC meeting was not convened by the PAO till the time of finalization of this audit report.

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Audit recommends that proper record of investment be maintained and provided to Audit for review.

11.4.2.4 Uncertified payment of Price Differential Claim (PDC) to Oil Marketing Companies (OMCs)/Petroleum Companies- Rs 7,472.50 million According to Para 10 of GFR Vol-1, every officer incurring or authorizing expenditure from public funds should be guided by high standards of financial propriety. During the review of record of Ministry of Finance, Audit noted that subsidy paid to Oil Marketing Companies (OMCs)/ petroleum companies, on provisional basis, amounted to Rs 7,472.50 million during 2009-10. The detail of payment on this count is mentioned below:
Sr. No 1 2 3 4 5 6 7 8 9 10 11 Name of Company Pakistan State Oil (PSO) Shell Pakistan Ltd. Chevron (Caltex) Attock Petroleum TOTAL PARCO ADMORE Overseas Oil Trading Company Bakri Trading BOSICOR Pakistan Pvt. Ltd Hascombe Storage Pak Arab Pipeline Ltd. Total Amount Rs in million 3,710.51 1,382.118 593.654 672.21 482 13.37 23.6 14.88 12.21 67.95 500 7,472.502

Audit maintains that the Ministry did not carry out due diligence and ignored the imperatives of prudence, while making these payments in violation of the cited provision of rule. Audit maintains that making payments to petroleum companies/ OMCs on provisional basis and without certification of claims may result in excess payments. The management replied that Finance Division made payments on provisional basis as Ministry of Petroleum and Natural Resources is the administrative ministry of oil industry and all OMCs. Refineries regularly submit audit reports to Ministry of

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Petroleum and Natural Resources. The main reason to make payments on provisional basis was to be on a safe side. Audit holds that the reply is not satisfactory. If the administrative ministry had not verified the claims, it was the responsibility of Finance Division not to make payments against un-verified claims. The DAC meeting was not convened by the PAO till the time of finalization of this audit report. Audit recommends that payments in respect of price differential claims only be made against certified claims.

11.4.2.5

Absence of capacity to verify Price Differential Claims

As per Rules of Business 1973, Ministry of Finance is responsible for finances of the Federal Government and financial matters affecting the country as a whole. During the review of record of Ministry of Finance, Audit noted that a Chartered Accountant firm was engaged to establish the validity of Price Differential Claims (PDC) submitted by the Oil Marketing Companies (OMCs) and petroleum companies. The consultants were paid Rs 15,339,550 from May, 2007 to August, 2009 on this account. Audit further noted that PDC claims of OMCs and petroleum companies for the period from April 06, 2006 to June 30, 2008 had amounted to Rs 209,676.29 million out of which Rs 190,251.32 million had been paid. Audit maintains that the Government of Pakistan has been absorbing billion of rupees on account of price differential claims to the oil industry. However, Ministry of Finance, which has the responsibility, under the Rules of Business, 1973, for managing the financial affairs affecting the country as a whole, has not developed institutional capacity to verify these claims by applying standard verification procedures. Therefore, the Ministry has to rely on third party services. In absence of any adequate procedures developed by the Ministry for authenticating claims, there was a risk of unrecorded liability or over payment of claims. Further, the expenditure on hiring of consultants was an extra burden on the exchequer. No reply was received till finalization of this audit report.

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The DAC meeting was not convened by the PAO till the time of finalization of this audit report. Audit recommends that management needs to develop the institutional capacity supported by a set of procedures for authenticating the claims and to minimizing the scope for any overpayments. 11.4.2.6 Expenditure of Rs 28.60 million on account of over time paid to staff of Pak Mint during 2009-10 Para 10 of GFR Vol-I stipulates that every officer incurring or authorizing expenditure from public funds should be guided by high standards of financial propriety. Public moneys should not be utilized for the benefit of a particular person or section of the community. The amount of allowances granted to meet expenditure of a particular type should be so regulated that the allowances are not on the whole a source of profit to the recipients. Similarly, para 11 of GFR Vol-I, states that each head of a department is responsible for enforcing financial order and strict economy at every step. Audit noted that the management of Pakistan Mint incurred an expenditure of Rs 28,603,705 for the financial year 2009-10 on account of overtime allowance to employees. Audit observed that: i. The overtime payment of Rs 28.60 million against the production of 20 million coins seems disproportionate as during financial year 2008-09 the overtime payment amounted to Rs 16.94 million against production of 80.28 million coins, and during financial year 2007-08 overtime payment amounted to Rs 13.93 million against production of 13.28 million coins. ii. There was no valid justification recorded for over time claims and payments. iii. Without due and proper justification, the claim on account of over time did not seem to be valid. iv. Department-wise output was not maintained to figure out the actual work done by each employee in addition to their normal duties. In the absence of proper record payment of over time was doubtful. v. No production standards were devised to measure normal capacity of the production units and normal production time for standard hours of production. vi. Attendance of staff was being marked by a security guard who was not authorized for this activity.

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vii. There was no counter check to watch the proper attendance inside the work area thereby giving room to patronization of some staff. viii. No check and balance system was devised to overcome chances of absenteeism and un-authorized marking of attendance to avoid fraudulent and mala-fide practices. Audit holds that the payment of overtime allowance was in violation of rules owing to the above mentioned irregularities. In the absence of any production standards and any system of internal control to verify overtime payment, the justification, integrity and accuracy of overtime paid could not be established. In response, the management replied that the overtime is granted only due to exigency of production requirement. Prior justification is given before sanction of overtime. Multifarious works / assignments are done by the workmen. Attendance of workmen is counter checked by Muster Man and Deputy Works Managers in work areas. The reply is not tenable. In the absence of department-wise detail of actual production, the authenticity of the claims could not be verified. The DAC meeting was not convened by the PAO till the time of finalization of this audit report. Audit recommends that: a) Production standards should be framed and got approved from competent authority so as to measure normal capacity of the production units and normal production time for standard hours of production. b) A system of internal control be devised to mitigate the chances of undue favors to staff and stop unauthorized payment of over time. c) Independent computerized card system be introduced to watch in and out timings of each employee. This would help to avoid un-authorized payment of overtime and undue patronization. 11.4.2.7 Recovery of overpayment to contractor-Rs 2.40 million According to Para 10 of GFR Vol-1, every public officer is expected to exercise the same vigilance in respect of expenditure incurred from public moneys as a person of ordinary prudence would exercise in respect of expenditure of his own money.

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Central Directorate of National Savings (CDNS), Islamabad entered into an agreement with a firm for supply of 400 HP Compaq computers at a cost of Rs 57,750 per unit, in May 2006. In terms of Article VI of the contract agreement, the contract price and contract payments was inclusive of all taxes and other duties. Audit observed that the management of CDNS had paid Rs 23.100 million for 400 computers @ Rs 57,750 per computer against an invoice of Rs 25,502,400 submitted on 30-06-2006. The additional amount of Rs 2,402,400 added to the invoice was claimed to have included General Sales Tax (GST), levied after the award of contract. The CDNS referred the case for remaining claim of the contractor to Finance Division, which approved the payment of Rs 2,402,000 on account of refund of GST to the contractor. Audit maintains that the CDNS was not under any obligation to entertain any claim for taxes imposed after award of contract and the contractor was bound to supply the computers at agreed cost inclusive of all taxes in accordance with the provision of contract. Further amount of GST paid @ 10.4% of the total contract value was never levied on the purchase of computers. Audit holds that the payment in excess of contract price was in violation of the cited provisions of law and has resulted in extra financial burden on the exchequer. In response to the observation, the management replied that the vendor has already been asked vide this Directorates Letter dated16-06-2006 and followed by reminders dated 25-05-2010, 10-06-2010 and 10-12-2010 to deposit the GST refunded amount. In addition to this, the case has also been forwarded to the Legal Section of this Office for undertaking appropriate Legal proceedings for prompt recovery of the amount in question from the concerned firm without any loss of time. The management has agreed to the contents of the observation. The DAC meeting was not convened by the PAO till the time of finalization of this audit report. Audit recommends that investigation be undertaken to fix the responsibility on officials responsible for this lapse and the amount of Rs 2,402,000 be recovered from the vendor.

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CHAPTER 12

12 MINISTRY OF HEALTH 12.1 Introduction of Ministry The Ministry of Health is responsible for matters concerning National Planning and Coordination in the field of health. Ministry of Health consists of one division i.e. Health Division. The main role of the Ministry is: - International liaison - Legislation pertaining to the drugs and medicines, administration of drugs Acts 1976 - Maintenance of educational standard, education abroad, educational facilities for backward areas, and for foreign nationals Pakistan is committed to achieving the Millennium Development Goals as the national agenda for development as well as reducing the burden of poverty and disease. Health, education and poverty alleviation are Government priorities. There is a full commitment at policy level about the importance of investing in health as a critical input for socioeconomic development. The departments attached with the Ministry of Health are: - Central Drugs Laboratory, Defence Housing Authority Karachi - Drugs Controller, Blue Area Islamabad - Federal Government Services Hospital, Islamabad - Jinnah Postgraduate Medical Centre, Karachi - National Council for Homeopathy, Islamabad - National Council for Tibb, Islamabad - National Health Information Resource Center Islamabad (NHIRC) - National Health MIS - National Institute for Handicapped, Islamabad - National Institute of Cardiovascular Diseases, Karachi - National Institute of Child Health, Karachi - National Institute of Health, Islamabad - Pakistan Nursing Council, Islamabad - Pharmacy Council of Pakistan, Islamabad - Drugs Control Organization - Pakistan Medical &Dental Council, Islamabad - College of Physicians and Surgeons of Pakistan, Karachi

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Pakistan Institute of Medical Sciences, Islamabad Pak Medical & Research Council, Islamabad Health Services Academy, Chak Shahzad Islamabad Drugs Control Organization, Peshawar Drugs Controller, Abbasi Clinic & Hospital Karachi National Program for Primary Health Care & Family Planning Centers

12.2 Comments on Budget & Accounts (Variance Analysis) Grant wise detail of current and development expenditure is mentioned below: (Figures in Rupees) %age Grant Supplementary Grant Type Original Grant Final Grant Expenditure Excess / (Saving) Excess/ No Grant (Saving) 54 Current 247,980,000 9,352,000 257,332,000 203,093,317 (54,238,683) (21.08) 55 Current 4,258,244,000 408,882,000 4,667,126,000 4,662,695,318 (4,430,682) (0.09) 56 Current 406,567,000 6,350,000 412,917,000 411,428,693 (1,488,307) (0.36) Subtotal 4,912,791,000 424,584,000 5,337,375,000 5,277,217,328 (60,157,672) (1.13) 154 Development 23,156,120,000 141,000 23,156,261,000 16,597,446,917 (6,558,814,083) (28.32) Subtotal 23,156,120,000 141,000 23,156,261,000 16,597,446,917 (6,558,814,083) (28.32) Total 28,068,911,000 424,725,000 28,493,636,000 21,874,664,245 (6,618,971,755) (23.23) Audit noted that there was an overall saving of Rs 6,618 million, which was mainly due to saving of Rs 6,558 million in development grant. Supplementary grants obtained without careful cash forecasting. In order to ensure prudent financial management, Para 13(vii) of System of Financial Control and Budgeting, 2006 states that Ministries / Divisions should be able to anticipate budgetary requirements well ahead of the financial year to which the budget relates and obtain the concurrence of the Finance Division. The Finance Division is expected to decline any request for supplementary grants except in extraordinary circumstances. This document further states that the funds obtained from supplementary grants shall be expended for the purposes for which these have been sanctioned. In current expenditure, demands for supplementary grants shall not be made, except in extraordinary circumstances. During the year, supplementary grants of Rs 424.725 million were obtained which were 1.5% of original allocation. According to Para 71 of General Financial Rules (Volume I), while framing budget estimates, the authorities should exercise utmost foresight. Variation between estimated

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and actual expenditure captures the level of foresight that goes into budget formulation. As shown in the graph below, the excess in current expenditure was 7.42%, which, after accounting for supplementary grants changed to savings of 1.13%. In development expenditure, savings against original budget was 28.32% which remained at 28.32% when supplementary grants were taken into account.

12.3 Brief comments on the status of compliance with PAC Directives

Years Total No Of Paras Compliance Non-Complied % of compliance 0 0 0 1987-88 5 5 0 100% 1988-89 7 6 1 86% 1989-90 5 5 0 100% 1990-91 15 0 15 0% 1991-92 15 12 3 80% 1992-93 16 16 0 100% 1993-94 7 7 0 100% 1994-95 8 2 6 25% 1995-96 27 17 10 63% 1996-97 0 0 0 1997-98 0 0 0 1999-00 64 37 27 58% 2000-01 0 0 0 2001-02 2 0 2 0% 2006-07 1PAR 0 1 0% 2006-07 7 0 7 0% 2008-09 Note: The report for the audit years 1998-99, 2002 2006, 2007-08 have not been discussed in the Public Accounts Committee (PAC)

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12.4 AUDIT PARAS 12.4.1 Performance 12.4.1.1 Lack of environmental due diligence in respect of licensing process for pharmaceutical companies Para 4.2 of Environmental Protection Agency (EPA), Sectoral Guidelines for Environmental Reports-Major Chemical and Manufacturing Plants, elaborates that, bioindustrial and pharmaceutical waste can contain hazardous waste materials. When dealing with disposal of such solid waste the following practices should be adopted. For hazardous and radioactive materials there should be adequate treatment, storage and disposal facilities. Procedures to ensure wastes are only disposed off at facilities which are operated in accordance with Environmental Protection Agency (EPA) standards.

During the review of record of Drug Control Organization (DCO), under the administrative control of Ministry of Health, Audit noted that the DCO, as part of license issuing process, do not take in to account any environmental considerations, which is an important pre-requisite under international best management practices and cited guidelines. Audit further noted that DCO has not embedded environmental concerns in its regulations pertaining to pharmaceutical industry. DCO has not framed and enforced any rules for protection of environment from hazardous pharmaceutical waste. The DCO as regulator of pharmaceutical industry has not institutionalized environmental due diligence in the industry in accordance with EPAs regulations for pharmaceutical sector. Audit holds that the disregard to the imperative of environmental concerns in drug license issuing process has resulted in environmental degradation. The management did not respond to the observation till finalization of this Report. The DAC meeting was held on 10.02.2011 which directed to provide relevant record to Audit within two weeks. Audit recommends that Drug Control Organization needs to ensure compliance to EPA rules by making environmental considerations a part of its licensing process.

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12.4.1.2 Loss due to procurement of medicines & laboratory material and recovery thereof- Rs 2.279 million According to Para 23 of GFR Vol.-I, every government officer should realize fully and clearly that he will be held personally responsible for any loss sustained by the government through negligence or fraud. During the review of the record of Sheikh Khalifa Bin Zayyed Federal Hospital, Quetta for the year 2009-10, Audit noted that the management had purchased large quantities of medicines from various firms. These purchases included medicines and laboratory material worth Rs 2,279,551 which had almost reached the expiry date, as per the following break-up:
Description Medicines expired Laboratory items expired Total Amount (Rs) 1,534,251 745,300 2,279,551

Audit maintains that the subject procurement resulted in wastage of public funds. No reply was received till finalization of this audit report. The DAC meeting was held on 10.02.2011, which directed that an internal inquiry be conducted to fix responsibility and results be reported to Audit within 45 days. Audit recommends that while procuring medicines the date of expiry be properly checked. Further, internal inquiry be expedited, responsibility be fixed and amount be recovered from the concerned officials. 12.4.2 Irregularity & non compliance 12.4.2.1 Recovery of rent of shops and utility charges from contractors - Rs 7.90 million As per Para-26 of GFR-Vol-1, it is responsibility of every controlling officer to see that all sums due to Government are regularly and promptly assessed and realized. During the review of record of Pakistan Institute of Medical Sciences (PIMS), Islamabad, Audit noted that an amount of Rs 7.90 million was outstanding against eight contractors since long.

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Audit maintains that non collection of long outstanding rent and utility charges from the contractors is in violation of cited rule. The non collection of dues deprived the exchequer of its due receipt. No reply was received till the date of the issuance of the report. The DAC meeting was held on 10.02.2011. The DAC was informed that the matter is subjudice and the details of court cases and inquiry report would be communicated to Audit. Audit recommends that an inquiry be undertaken, responsibility be fixed on officials responsible for non recovery of receipts and recovery be made from the contractors.

12.4.2.2 Illegal lease of 100 kanals of land to a minor by NIH authorities and encroachment on 40 kanals of land As per the Contract Act-1872 every person is competent to contract who is of the age of majority according to the law to which he is subject. The management of National Institute of Health (NIH) entered into an agreement with an individual and leased out its 100 kanals land for fruit farming on under mentioned terms and conditions: i. ii. The piece of land for fruit farming would be 100 kanals. The contractor would be bound to provide green fodder to NIH stable worth Rs 50,000 at the tender rates each year subject to confirmation by the Head, V&FMS. The cost of fruit plants to be grown on the above land for a period of initial five years would be borne by the contractor without any financial involvement of NIH. In the subsequent five years, the total income from fruit trees would be shared by the NIH and contractor on fifty percent basis, subject to the confirmation by the head Veterinary & Farms Managements Sub-Division (V&FMS).

iii.

iv.

Audit observed that the contract was entered in to with a minor who was the son of an employee of NIH, in violation of the cited rule. Thus, the contract was void ab initio. The contractor occupied 140 kanals of land instead of 100 kanals leased out to him. The management held an inquiry in 2006, which pointed out that contract, was awarded without adopting open tender system. The inquiry recommended canceling the contract

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immediately and initiation of action against officers identified for this lapse. Audit further observed that the management had not taken any action on the findings of inquiry. Audit maintains that the management did not observe the provisions of Contract Act, 1872 which resulted in the misuse of public assets. No reply had been received till the finalization of the report. The DAC meeting was held on 10.02.2011 which directed the management to hold an independent inquiry and results be communicated to Audit. Audit recommends that the action initiated by the management in subject case be shared with Audit and relevant record of the last eight years be also provided.

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CHAPTER 13

13 HIGHER EDUCATION COMMISSION 13.1 Introduction of Commission Higher Education Commission (HEC) was setup under an Ordinance in September 2002 to facilitate the development of indigenous universities to be world-class centers of higher education, research and development. Through facilitating this process, the HEC intends to play its part in spearheading the building of a knowledge-based economy in Pakistan. HEC is successor of Universities Grants Commission with enhanced powers and new vision. Since its establishment, the HEC has undertaken a systematic process of implementation of the five-year agenda for reform outlined in the HEC Medium Term Development Framework (MTDF), in which access, quality and relevance have been identified as the key challenges faced by the sector. To address these challenges a comprehensive strategy has been defined that identifies the core strategic aims for reform as (i) Faculty development, (ii) Improving access, (iii) Excellence in learning and research, and (iv) Relevance to national priorities. These strategic aims are supported by well-integrated cross-cutting themes for developing leadership, governance and management, enhancing quality assessment and accreditation and physical and technological infrastructure development.

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13.2 Comments on Budget & Accounts (Variance Analysis) Grant wise detail of current and development expenditure is mentioned below: (Figures in Rupees)
Grant Grant Type No 29 Current Original Grant 21,500,000,000 Supplementary Grant 1,050,000,000 Final Grant 22,550,000,000 %age Excess / (Saving) Excess/ (Saving) 22,550,000,000 Expenditure

Supplementary grants obtained without careful cash forecasting In order to ensure prudent financial management, Para 13(vii) of System of Financial Control and Budgeting, 2006 states that Ministries / Divisions should be able to anticipate budgetary requirements well ahead of the financial year to which the budget relates and obtain the concurrence of the Finance Division. The Finance Division is expected to decline any request for supplementary grants except in extraordinary circumstances. This document further states that the funds obtained from supplementary grants shall be expended for the purposes for which these have been sanctioned. In current expenditure, demands for supplementary grants shall not be made, except in extraordinary circumstances. During the year, supplementary grants of Rs 1,050 million were obtained which were only 5% of original allocation. According to Para 71 of General Financial Rules (Volume I), while framing budget estimates, the authorities should exercise utmost foresight. Variation between estimated and actual expenditure captures the level of foresight that goes into budget formulation. As shown in the graph below, the excess in current expenditure against original allocation was 4.88%, which, after accounting for supplementary grants was nil.

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13.3 Brief comments on the status of compliance with PAC Directives

Years Total No Of Paras Compliance Non-Complied % of compliance 0 0 0 1987-88 0 0 0 1988-89 0 0 0 1989-90 0 0 0 1990-91 0 0 0 1991-92 0 0 0 1992-93 0 0 0 1993-94 0 0 0 1994-95 0 0 0 1995-96 0 0 0 1996-97 0 0 0 1997-98 11 9 2 82% 1999-00 26 0 26 0% 2000-01 0 0 0 2001-02 8 0 8 0% 2006-07 0 0 0 2008-09 Note: The report for the audit years 1998-99, 2002 2006, 2007-08 have not been discussed in the Public Accounts Committee (PAC)

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13.4 AUDIT PARAS 13.4.1 Non production of record 13.4.1.1 Non-production of record of inquiry of project IT Services Networking According to section 14 of Auditor-General's (Functions, Powers and Terms and Conditions of Service) Ordinance, 2001, the Auditor-General shall, in connection with the performance of his duties under this Ordinance, have authority to require that any accounts, books, papers and other documents which deal with, or form, the basis of or otherwise relevant to the transactions to which his duties in respect of audit extend, shall be sent to such place as he may direct for his inspection. During the review of record of Allama Iqbal Open University (AIOU) Audit noted that management of AIOU issued an Office Order dated 18.2.2006 for holding of an inquiry in to issues of non-compliance of Store Procurement Rules in the IT Services Networking Project and irregularities committed in this regard. The Office Order directed the inquiry committee to submit its report within two weeks of the issuance of the office order. However, no further action was taken on the report of the committee till 15.06.2010, when the management issued an Inquiry Clearance letter addressed to the erstwhile Project Director, IT Services Networking Project. Audit requested the management for providing a copy of inquiry committees report, which was never produced despite reminders. Audit holds that non-production of record to Audit is in violation of section 14 of Auditor-General's (Functions, Powers and Terms and Conditions of Service) Ordinance, 2001. In the absence of record, the Audit was not in a position to examine the irregularities committed in the IT Services Networking Project. No reply was received till finalization of this audit report. The DAC meeting was not convened by the PAO till the time of finalization of this audit report. Audit recommends that responsibility be fixed, disciplinary action be initiated against officials responsible for this lapse under relevant Efficiency and Discipline Rules as

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required under Section 14(3) of Auditor-General's (Functions, Powers and Terms and
Conditions of Service) Ordinance, 2001 and record be provided to Audit for review.

13.4.2 Fraud/Misappropriation 13.4.2.1 Loss by accepting low quality printing paper - Rs 36.28 million According to rule 15(1) and 35 of Public Procurement Rules 2004 a procuring agency, prior to the floating of tenders, invitation to proposals or offers in procurement proceedings, may engage in pre-qualification of bidders in case of procurement of expensive and technically complex equipment. Rule 4 of ibid Rules states that procuring agencies, while engaging in procurements, shall ensure that the procurements are conducted in a fair and transparent manner, the object of procurement brings value for money to the agency and the procurement process is efficient and economical. Rule 10 of Public Procurement Rules 2004, provides that specifications shall allow the widest possible competition and shall not favor any single contractor or supplier nor put others at a disadvantage. Bid evaluation criteria and details of standards that are to be used in assessing the quality of goods shall include in competitive bidding as required under rule 23 (2)(j)&(l) of Public Procurement Rules 2004. Audit observed that Allama Iqbal Open University (AIOU) directly invited tenders in April 2009 for the purchase of heavy quantities of white printing papers instead of prequalification of bidders as provided under cited rules. The tenders were opened on 27-062009 by a purchase committee constituted under the chairmanship of Director, Institute of Mass Educations. Nine firms participated in the bidding process. Tender document, samples of papers along with comparative statement were sent to Director Printing Press Unit (PPU) for technical analysis and on the recommendations of Director PPU the contracts for supplying of printing papers were awarded to the firms who had quoted lowest rates i.e. M/S Z. A corporation for 20x30/80 Gsm and 23x36/80 Gsm & M/S Syed paper mill Lahore, for 20x30/68 Gsm & 23x36/68 Gsm. Audit observed that tenders were called, in generic terms, without mentioning detailed standards/qualities/ brands and origin of the papers, which was in-violation of criteria for competitive bidding.

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On scrutiny of printing material/ books, Audit observed that the quality of printing papers procured did not match with samples provided by the bidders. Audit carried out an open market survey to assess the actual value of the papers supplied by the contractors to the AIOU, which revealed that AIOU had sustained a loss of Rs 36.29 million by receiving low quality supplies. The detailed working of the loss is at Annex-8. Audit holds that the management had deliberately ignored the requirement of mentioning detailed standards/qualities/ brands and origin of the papers in the bidding documents, in violation of cited rules. Further, the acceptance of low quality paper indicates collusion between the officials concerned and the supplier. In response, the management replied that grammage was the most important element of quality of paper and there was neither expertise nor technical facility in AIOU to analyze the other specification aspects. There was no compulsion to procure new wood pulp printing paper only. Since recycled paper was also acceptable, the difference in shade was not objectionable. The reply is not cogent as the management has not responded to the contents of the para. In an organization, which owns a printing press and has a huge printing portfolio is not expected to claim lack of expertise as cause of loss. The DAC meeting was not convened by the PAO till finalization of the report. Audit recommends that inquiry be held to investigate the matter, responsibility be fixed, and disciplinary action be initiated against the officials responsible for this loss. 13.4.3 Performance 13.4.3.1 Recovery of Rs 9.7 million and US$ 406,760 from 13 scholars The PC-I tiled MS Level Training in Korean Universities/ Industry, was approved by CDWP at a capital cost of Rs 439.500 million for a period of 72 months on 13-10-2005. The cost of the project was revised to Rs 525.473 million in June 2009. The scheme envisaged Master Level Training of 250 candidates in Advanced Engineering and Technological fields at South Korean universities.

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Under PC-I, the prospective masters scholars were required to furnish a guarantee to the Higher Education Commission (HEC) to work in Pakistan for a minimum period of 02 years in the Public Sector Universities/ R&D organizations after completion of masters degree and industrial training. An agreement deed to this effect was signed with each candidate as per following terms and conditions. i. Each awardee executed a bond with the HEC ensuring that immediately after successful completion of his / her MS (engineering) studies (maximum 2 years) and internship training program maximum 6 months). he/ she will serve public sector universities/ R&D organizations/ Industrial Sector in Pakistan for at least two (02 ) consecutive years. Each awardee signed an agreement with the authorized representative of Higher Education Commission (HEC) on judicial stamp paper, to the effect that in case the awardee fails to complete his/ her study, he /she will returned to the HEC, the total amount spent on his/ her studies by the HEC. In addition, each awardee provided a personal guarantee of a person of means, on judicial stamp paper , to the effect of ensuring the recovery, in case of default to HEC.

ii.

iii.

Audit noted that on completion of MS Level training in Korean Universities/Industry, the 13 candidates had not returned to Pakistan but left Pakistan after few days and failed to serve in Pakistan at least for a period of 2 years, which was in violation to the above mentioned terms and condition of the agreement. Audit is of the view that the entire expenditure incurred on the 13 scholars was a wasteful investment, and thus a drain on the exchequer. In response the management replied that the recovery suits have been filed against Financial Guarantors, summons have been issued by the civil court of Islamabad and currently cases are pending adjudication at different stages. The DAC meeting was not convened till the finalization of this Report. Audit recommends that the HEC may pursue the case vigorously to ensure recovery of the amount.

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13.4.3.2 Recovery from students expelled by Cuban Government on disciplinary grounds - Rs 2.52 million As per provisions of the PC-I titled 1000 Cuban Scholarships for Studies in General Comprehensive Medicines approved in November 2006, the Government of Pakistan was to send Pakistani students to Cuba for medical education. The PC-I envisaged that Government of Pakistan would provide pocket money, return economy class air ticket, operational and administrative costs to the scholars. The agreement deed signed with each student required that the scholar shall refrain from engaging himself/ herself in any political, commercial or any other activity incompatible with his/her program of studies abroad. During the course of review of record of Higher Education Commission, Audit observed that 15 students, sent for study in Cuba, were expelled by Cuban Government on disciplinary grounds. Audit noted that there was an expenditure of Rs 2,517,387 incurred on these students from February 2007 to April, 2010 by the government. Audit is of the view that the entire expenditure incurred on the 15 expelled students was a wasteful investment, and thus a drain on the exchequer. In response, the management replied that the 15 expelled students reached Pakistan in April 2010. This issue was raised in the Senate Standing Committee on Education which further referred it to the Ministry of Foreign Affairs and Prime Minister, Secretariat for revival of Cuban scholarship of these 15 students. The matter is currently with Prime Minister Secretariat. The DAC was not convened till the finalization of the report. Audit is of the view that appropriate measures should be taken to resolve the issue at the earliest.

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13.4.4 Internal control weaknesses 13.4.4.1 Non approval of Financial and Endowment Fund Rules from the Ministry of Finance According to GFR-25 all departmental regulations in so far as they embody orders or instructions of a financial character or have important financial bearing should be made by, or with the approval of the Ministry of Finance. As per Section 5 (e) of Controller General of Accounts (Appointment, Functions and Powers) Ordinance, 2001, the advice of Controller General is required for accounting procedure for new schemes, programmes or activities undertaken by the government. During the review of record of Allama Iqbal Open University (AIOU), Audit noted that the Executive Council in its 55th meeting held on 29.3.1997 created an Endowment Fund and approved the Endowment Funds Rules. The Council in its 77th meeting held on 14.10.2004, approved the Financial Rules of AIOU. Audit observed that the Endowment Fund was created and Financial Rules were approved by the Council without the approval of the Ministry of Finance in violation of cited rules. Audit also observed that the management of AIOU had retained a sum of Rs 2,754.76 million in the Endowment Fund and had incurred an expenditure of Rs 16.57 million out of the Fund during the Financial Year 2009-10. Audit notes that the AIOU utilizes its receipts to meet its expenditure while it also receives annual budget allocation from the Federal Government. The Endowment Fund has been created by diverting surplus funds in to it. These surplus funds have largely resulted from periodic increase in the rate of fee, creation of a variety of fee for various courses and low rate of payment to tutors. With the Endowment Fund reaching to Rs 2,754.76 million, there are fair indications that AIOU has become self sustained and does not require annual budget allocation from the Federal Government. However, AIOU is still in receipt of budget allocation from the government. Audit holds that without the due diligence by the Controller General of Accounts and in the absence of the approval of Finance Division, the Financial Rules and the Endowment Fund Rules are in violation of cited rules. In response to the observation, the management replied that The AIOU Act 1974 empowered the Executive Council in Chapter-V, Section 27(2) that the Executive Council may make rules to regulate any matter relating to the affairs of the university,

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which, by this Act, are not specifically required to be provided for by Statutes or Regulations. Further management replied that the Act also empowers the university under clause-19(V) to regulate, determine and administer all other matters concerning the university. The reply is not satisfactory as the Executive Council is vested with the power to make rules to regulate any matter relating to the affairs of the University, which, by this Act, are not specifically required to be provided for by Statutes or Regulations. This implies that the Council cannot make rules in matters which are governed by other regulations. The DAC meeting was not convened till finalization of this report. Audit recommends that Financial Rules and Endowment Fund Rules be got approved from Finance Division. A committee be constituted to examine the universitys fee rate, and rate of payments to tutors.

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CHAPTER 14

14 MINISTRY OF INDUSTRIES AND PRODUCTION 14.1 Introduction of Ministry Ministry of Industries and Production is responsible for formulating and implementing a comprehensive strategy for industrialization of Pakistan for maximizing job creation and enhancing Pakistans international competitiveness. The functions of the Ministry as per the Rules of Business, 1973 are: National industrial planning and coordination Industrial policy Employment of foreign personnel in commercial and industrial enterprises Federal agencies and institutions for: i. Promoting industrial productivity; ii. Promotion of special studies in the industrial fields; and iii. Testing industrial products Keeping a watch, from the national angle, over general price trends and supply position of essential commodities; price and distribution control over items to be distributed by statutory orders between the provinces Administration of the Essential Commodities Control Order, 1971, and related laws including price and distribution controls Explosives (excluding the administration of Explosive Substances Act) and safety measures under the Petroleum Act and Rules made there-under Designs and inventions including patenting thereof Prescription and review of criteria for assessment of spare parts and raw materials for industries Administration of Boilers Act Development of Industries (Federal control) (Repeal) Ordinance, 1979 Economic Reforms (Protection of Industries) Regulation, 1972 Transfer of Managed Establishment Order, 1978 All matters relating to State Industrial Enterprises, especially, in basic and heavy industries, namely: i. State Engineering Corporation, Islamabad ii. Pakistan Automobile Corporation, Karachi iii. National Fertilizers Corporation, Lahore iv. Pakistan Steel Mills Corporation, Karachi v. Pakistan Industrial Development Corporation, Karachi Any other industrial enterprises assigned to the Division

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14.2 Comments on Budget & Accounts (Variance Analysis) Grant wise detail of current and development expenditure is mentioned below: (Figures in Rupees)
Grant No 62 63 64 Grant Type Current Current Current Total Original Grant 123,147,000 9,257,000 392,848,000 525,252,000 Supplementary Grant 5,476,000 5,000 7,000 5,488,000 Final Grant 128,623,000 9,262,000 392,855,000 530,740,000 Expenditure 118,854,416 9,155,611 391,110,864 519,120,891 %age Excess / (Saving) Excess/ (Saving) (9,768,584) (7.59) (106,389) (1.15) (1,744,136) (0.44) (11,619,109) (2.19)

Audit noted that there was an overall saving of Rs 11.62 million which was 2 percent of final grant. Supplementary grants obtained without careful cash forecasting In order to ensure prudent financial management, Para 13(vii) of System of Financial Control and Budgeting, 2006 states that Ministries / Divisions should be able to anticipate budgetary requirements well ahead of the financial year to which the budget relates and obtain the concurrence of the Finance Division. The Finance Division is expected to decline any request for supplementary grants except in extraordinary circumstances. This document further states that the funds obtained from supplementary grants shall be expended for the purposes for which these have been sanctioned. In current expenditure, demands for supplementary grants shall not be made, except in extraordinary circumstances. During the year, supplementary grants of Rs 5.488 million were obtained representing only 01% of original allocation. According to Para 71 of General Financial Rules (Volume I), while framing budget estimates, the authorities should exercise utmost foresight. Variation between estimated and actual expenditure captures the level of foresight that goes into budget formulation. As shown in the graph below, the saving in current expenditure was 1.17%, which, after accounting for supplementary grants changed to savings of 2.19%.

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14.3 Brief comments on the status of compliance with PAC Directives

Years Total No Of Paras Compliance Non-Complied % of compliance 2 0 2 0% 1987-88 0 0 0 1988-89 0 0 0 1989-90 4 0 4 0% 1990-91 4 4 0 100% 1991-92 2 0 2 0% 1992-93 19 19 0 100% 1993-94 4 2 2 50% 1994-95 2 0 2 0% 1995-96 1 0 1 0% 1996-97 0 0 0 1997-98 14 0 14 0% 1999-00 4 3 1 75% 2000-01 5 3 2 60% 2001-02 1PAR 0 1 0% 2006-07 0 0 0 2008-09 Note: The report for the audit years 1998-99, 2002 2006, 2007-08 have not been discussed in the Public Accounts Committee (PAC)

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14.4 AUDIT PARAS 14.4.1 Performance 14.4.1.1 Un-authorized payment of leave encashment and recovery thereof Rs 5.09 million As per clause 3.1 (n) of Engineering Development Board (EDB), the Board (EDB) shall frame rules for the regulation of the affairs of the EDB with the approval of Federal Government. Audit noted that EDB submitted their Service Rules for concurrence of the Finance Division, which categorically disagreed to the provisions of leave encashment and directed to delete the relevant clause from the rule vide their O.M No.2(5)-R14/1996142-2005 dated 24-03-2005. On scrutiny of payment record of EDB, Audit observed that management had paid encashment of balance / un-availed leave at the end of each year to its employees. The detail of amount paid during the years 2006-07 to 2009-10 is as under:
Year 2006-07 2007-08 2008-09 2009-10 Total Amount (Rs) 1,096283 910,178 1,691,865 1,388,993 5,087,319

Audit is of the view that the above payment was irregular and unauthorized as Finance Division had disagreed with the clause pertaining to payment for leave encashment and as such, there is no provision in the Government rules for payment of leave encashment. The management replied that leave encashment was allowed under the Service Rules that were approved by the Ministry of Production. However, Finance Division had only suggested the discontinuation of leave encashment on draft service rules of the EDB. The reply was not cogent as the Finance Division had categorically ordered to discontinue encashment of un-availed leave except LPR. The DAC meeting was not convened by the PAO till the time of finalization of this audit report.

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Audit recommended that the leave encashment payments made to employees may be recovered and deposited into Government Treasury under intimation to Audit. 14.4.2 Irregularity & non compliance 14.4.2.1 Unauthorized retention of Rs 44.46 million Para 95 of GFR Vol-I states, all anticipated savings should be surrendered to Government immediately but not later than 15th May of each year. During the review of Engineering Development Board (EDB), Audit noted EDB had been receiving budget from the government since 2005-06 to 2009-10 without surrendering unspent funds at the end of each financial year as detailed below:
Year 2005-06 2006-07 2007-08 2008-09 2009-10 Total Budget (Rs) 88,958,000 77,958,000 70,000,000 70,000,000 73,000,000 379,916,000 Expenditure (Rs) 68,558,000 67,900,442 59,500,000 66,500,000 73,000,000 335,458,442 Saving (Rs) (20,400,000) (10,057,558) (10,500,000) (3,500,000) 0 (44,457,558)

Audit noted that the non-surrendering of unspent balance was in violation of cited rule. The management replied that the Board of Management in its 28th meeting held on 03.09.2007 approved conversion of surplus funds into roll over budget. The reply is not satisfactory as the Board is not competent to make rules against the relevant standing instructions of government. The DAC meeting was not convened by the PAO till the time of finalization of this audit report. Audit recommends that the amount be surrendered to treasury under intimation to Audit.

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14.4.2.2 Recoverable amount of Rs 78.26 million In accordance with para 11 of GFR Vol-I, each head of the department is responsible for enforcing financial order and strict economy at every step. He is responsible for observance of all relevant financial rules and regulations. Audit noted that in violation of the above rule, Engineering Development Board (EDB) had incurred expenditure of Rs 91,356,911 on seminars by utilizing the funds provided by Corporations to Expert Advisory Cell (EAC) for its annual expenditure as detailed below:
Sr. No. 1 2 3 4 Seminar Midest 2007 Euromold 2007 Hannover Messe 2008 Sub-total Hannover Messe 2009 Sub-total Total Expenditure (Rs) 12,392,672 1,546,760 51,231,905 65,171,337 26,185,574 26,185,574 91,356,911

The Trade Development Authority of Pakistan (TDAP) had committed to provide 100% subsidy for the event at serial No.1,2,3 and 50% subsidy against the rent of space and construction cost of stand for the event at serial No.4. Thus, the amount due from TDAP was Rs 78.26 million but this was not realized by the EDB. The management replied that the matter will be put up to the Board of Management for future guidance and decision. The reply is not satisfactory as the managements response amounts to non-committal in realizing the dues. The DAC meeting was not convened by the PAO till the time of finalization of this audit report. Audit recommends that the amount of Rs 78.46 million be recovered from the TDAP.

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CHAPTER 15 15 MINISTRY OF INFORMATION AND BROADCASTING 15.1 Introduction of Ministry The Ministry of Information and Broadcasting has been established to produce, disseminate and facilitate the free flow of information to empower the people of Pakistan to participate in nation building and development. The Ministry of Information and Broadcasting is the apex body for formulation and administration of the rules and regulations and laws relating to information, broadcasting, the press and films in Pakistan. In order to ensure freedom of press and promotion of responsible print and electronic media in the country as envisaged in the Constitution of Islamic Republic of Pakistan, the Federal Government entrusted a number of task to the Ministry of Information and Broadcasting, as provided in the Rules of Business 1973. These are: Policy relating to internal publicity on national matters Broadcasting including television Production of films on behalf of the Government, its agencies, Government controlled corporations, etc Press relations, including delegations of journalists and other information media Provision of facilities for the development of newspaper industry Policy regarding government advertisement; control of advertisement and placement Audit of circulation of newspapers Liaison and coordination with agencies and media on matters concerning Government policies and activities External publicity Training facilities for radio and television personnel

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15.2 Comments on Budget & Accounts (Variance Analysis) Grant wise detail of current and development expenditure is mentioned below: (Figures in Rupees)
Grant No 65 66 67 68 69 155 Grant Type Current Current Current Current Current Development Total Original Grant 245,615,000 86,725,000 222,312,000 342,118,000 2,119,877,000 52,763,000 3,069,410,000 Supplementary Grant 13,413,000 470,174,000 1,400,277,000 1,882,000 1,885,746,000 Final Grant 259,028,000 86,725,000 692,486,000 342,118,000 3,520,154,000 54,645,000 4,955,156,000 Expenditure 234,457,096 90,869,473 461,742,540 431,751,008 3,536,248,039 41,125,244 4,796,193,400 %age Excess / (Saving) Excess/ (Saving) (24,570,904) (9.49) 4,144,473 4.78 (230,743,460) (33.32) 89,633,008 26.20 16,094,039 0.46 (13,519,756) (24.74) (158,962,600) (3.21)

Audit noted that there was an overall saving of Rs 158 million, of which Rs 230 million saving occurred in current grant No. 37 that partly offset by excess in other grants. Supplementary grants obtained without careful cash forecasting In order to ensure prudent financial management, Para 13(vii) of System of Financial Control and Budgeting, 2006 states that Ministries / Divisions should be able to anticipate budgetary requirements well ahead of the financial year to which the budget relates and obtain the concurrence of the Finance Division. The Finance Division is expected to decline any request for supplementary grants except in extraordinary circumstances. This document further states that the funds obtained from supplementary grants shall be expended for the purposes for which these have been sanctioned. In current expenditure, demands for supplementary grants shall not be made, except in extraordinary circumstances. During the year, supplementary grants of Rs 1,885 million were obtained which were only 60% of original allocation. According to Para 71 of General Financial Rules (Volume I), while framing budget estimates, the authorities should exercise utmost foresight. Variation between estimated and actual expenditure captures the level of foresight that goes into budget formulation. As shown in the graph below, the excess in current expenditure was 57.63%, which, after accounting for supplementary grants changed to savings of 2.97%. In development expenditure, savings against original budget was 322.06% which changed to 24.74% when supplementary grants were taken into account.

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15.3 Brief comments on the status of compliance with PAC Directives

Years Total No Of Paras Compliance Non-Complied % of compliance 1 1 0 100% 1987-88 1 0 1 0% 1988-89 3 2 1 67% 1989-90 2 2 0 100% 1990-91 1 1 0 100% 1991-92 3 2 1 67% 1992-93 7 7 0 100% 1993-94 2 1 1 50% 1994-95 2 0 2 0% 1995-96 3 1 2 33% 1996-97 0 0 0 1997-98 41 16 25 39% 1999-00 0 0 0 2000-01 0 0 0 2001-02 0 0 0 2006-07 0 0 0 2008-09 Note: The report for the audit years 1998-99, 2002 2006, 2007-08 have not been discussed in the Public Accounts Committee (PAC)

153

15.4 AUDIT PARAS 15.4.1 Irregularity & non compliance 15.4.1.1 Unauthorized and irregular expenditure on account of rent of office building hired for the media city - Rs 84.15 million Serial No. 09 (16) of the Annex-I of Para 8(a) of the Finance Divisions O.M.No.F.3(2)Exp-III/2006, dated 13.09.2006 regarding financial powers delegated to the PAOs of ministries / divisions and the heads of the departments states that rent for non-residential buildings up to Rs 100,000 per month can be paid by the Ministries / Divisions for buildings at Islamabad. Further, approved rates in respect of hiring of office building in commercial zone are Rs 25 per Sq ft for basement and Rs 40 per Sq ft for all other floors respectively. During the review of record of Ministry of Information and Broadcasting, Audit noted that a building owned by State Life Insurance Corporation of Pakistan (SLIC) had been hired by the Ministry on 15.07.2005 for establishment of Media City. Rent of Rs 2,246,552 per month was paid during the FY 2009-10. The detail of the payments made in respect of rent is as under:
Sr. 1 2 3 4 Cheque No. Date 2641519 26.06.2010 2641054 24.06.2010 Payment During 2008-09 Payment During 2007-08 Total Amount (Rs) 14,423,759 3,819,158 35,904,000 30,000,000 84,146,917

Audit observed that the building was hired for the purposes of Media City- a project, which had no approved PC-I. The monthly rent was sanctioned in excess of the authorized power. The Ministry failed to establish Media City for which the building was acquired at exorbitant rent. The Ministry paid on an average rate of Rs 75 per sq.ft. as rent. The rate was in excess of the rates approved by Pak PWD. Further, the approval of Finance Division was not obtained for hiring of building at higher rates. The payment relating to period prior to 2007-08 is not known due to non production of relevant record. In view of the above noted observations, Audit holds the expenditure as irregular and unauthorized.

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Audit maintains that the irregularities pointed out in the observation led to wastage of public funds. In response to the observation, the management stated that all codal formalities were fulfilled. The reply is not satisfactory in the absence of any substantive evidence. The DAC meeting was held on 02-02-2011, which directed that an inquiry be held within two weeks to fix responsibility. Audit recommends that the decision of the DAC be implemented.

15.4.1.2 Non obtaining of audited statements / utilization reports on account of grant in aid sanctioned to various press clubs - Rs 4.50 million Para 208 of GFR Vol-I states that in cases in which conditions are attached to the utilization of a grant in the form of specification of particular objects of expenditure or the time within which the money must be spent. Para 207 (3) of GFR Vol-I deals with the provision of grant-in-aid to non-official institutions and to semi-official ones, such as public clubs, etc which states that before a grant is paid to any public body or institution, the sanctioning authority should as far as possible insist on obtaining an audited statement of the account of the body or institution concerned in order to see that the grant-in-aid is justified by the financial position of the grantee and to ensure that any previous grant was spent for the purpose for which it was intended. During the scrutiny of the record of the Ministry of Information and Broadcasting, Audit noted that several payments were made to press clubs and owners of newspapers as per detail provided in the following table:
S. No. 1 Payee National Press Club Cheque No 2641388 Date 25.06.2010 Amount (Rs) 3,000,000 Purpose of Grant Not stated in the agreement entered between the parties. For etc. office building

Electronic Media Club Sargodha

2265779

09.09.2009

500,000

155

Okara Press Club

2639823

18.06.2010

300,000

Mr. Fazal Khan Mr. Tariq

Rahim

2639955

21.06.2010

50,000

5 6 7 8

2639676 2639922 2639822 2639934

18.06.2010 21.06.2010 18.06.2010 21.06.2010

50,000 50,000 50,000 200,000

Shah Wali Ullah Mr. Rashid Iqbal Hafizabad Press Club

Press Club Lala Musa

2639139

16.06.2010

300,000

Not stated in the agreement entered between the parties. Not stated in the agreement entered between the parties. To restart Salam, Sawat. To restart Salam, Sawat. For financial support to Daily Chand Swat. Not stated in the agreement entered between the parties. Not stated in the agreement entered between the parties.

Total

4,500,000

Audit observed that there was no adjustment account available in the record in respect of these grants. The purpose and objective of some of these grants was also not known as indicated in the above table. Audit holds that the accuracy and completeness of this expenditure is not verifiable in the absence of adjustment account. The management stated that grant was given without imposing any conditions as press friendly policy of Government. The reply of management is not satisfactory as the requirement of adjustment account cannot be waived off in any circumstances. The DAC meeting was held on 02-02-2011, which directed the management to provide utilization report to Audit within a month. Audit recommends that the decision of DAC be implemented.

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CHAPTER 16

16 MINISTRY OF INFORMATION TECHNOLOGY 16.1 Introduction of Ministry The Ministry of Information Technology (MoIT) is the national focal Ministry and enabling arm of the Government of Pakistan for planning, coordinating and directing efforts to initiate and launch Information Technology and Telecommunications programs and projects aimed at economic development of the country. Ministry of Information Technology is strategically run by elected representatives of the public and administratively controlled by the bureaucracy. Being the primary concern for any government this sector is controlled by each provincial Ministry at provincial level and by district governments at district level. The core operational activities of the Ministry are: Preparation of an overall integrated Plan as well as formulation of policy for the development and improvement of information technology including infrastructure in Pakistan Cooperation with the provincial Governments, autonomous bodies, private sector, international organizations and foreign countries in respect of information technology Promotion of information technology applications Providing guidelines for the standardization of software for use within the Government Matters relating to Pakistan Computer Bureau, Pakistan Software Export Board and the National Information Technology Commission Planning, policy making and legislation covering all aspects of telecommunications excluding radio and television

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16.2 Comments on Budget & Accounts (Variance Analysis) Grant wise detail of current and development expenditure is mentioned below: (Figures in Rupees) %age Grant Supplementary Grant Type Original Grant Final Grant Expenditure Excess / (Saving) Excess/ No Grant (Saving) 70 Current 1,616,270,000 285,965,000 1,902,235,000 2,069,807,698 167,572,698 8.81 156 Development 1,118,508,000 6,000 1,118,514,000 552,687,446 (565,826,554) (50.59) Total 2,734,778,000 285,971,000 3,020,749,000 2,622,495,144 (398,253,856) (13.18) Audit noted that there was an overall saving of Rs 398.25 million, which was due to saving of Rs 565.83 million in development expenditure that was partly offset by excess expenditure of Rs 167.57 million in current expenditure. Supplementary grants obtained without careful cash forecasting In order to ensure prudent financial management, Para 13(vii) of System of Financial Control and Budgeting, 2006 states that Ministries / Divisions should be able to anticipate budgetary requirements well ahead of the financial year to which the budget relates and obtain the concurrence of the Finance Division. The Finance Division is expected to decline any request for supplementary grants except in extraordinary circumstances. This document further states that the funds obtained from supplementary grants shall be expended for the purposes for which these have been sanctioned. In current expenditure, demands for supplementary grants shall not be made, except in extraordinary circumstances. During the year, supplementary grants of Rs 285.971 million were obtained which were 10% of original allocation. According to Para 71 of General Financial Rules (Volume I), while framing budget estimates, the authorities should exercise utmost foresight. Variation between estimated and actual expenditure captures the level of foresight that goes into budget formulation. As shown in the graph below, the excess in current expenditure was 28.06%, which, after accounting for supplementary grants decreased to 8.81%. In development expenditure, savings against original budget was 50.59% which changed to 50.59% when supplementary grants were taken into account.

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16.3 Brief comments on the status of compliance with PAC Directives

Years Total No Of Paras Compliance Non-Complied % of compliance 0 0 0 1987-88 0 0 0 1988-89 0 0 0 1989-90 0 0 0 1990-91 0 0 0 1991-92 0 0 0 1992-93 0 0 0 1993-94 0 0 0 1994-95 0 0 0 1995-96 0 0 0 1996-97 0 0 0 1997-98 0 0 0 1999-00 0 0 0 2000-01 0 0 0 2001-02 1 1 0 100% 2006-07 0 0 0 2008-09 Note: The report for the audit years 1998-99, 2002 2006, 2007-08 have not been discussed in the Public Accounts Committee (PAC)

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16.4 AUDIT PARAS 16.4.1 Irregularity & non compliance 16.4.1.1 Recovery on account of house rent allowance - Rs 5.54 million Under rule 26 (1) of Accommodation Allocation Rules 2002, a government servant who is allotted a government accommodation shall pay 5% as rental charges. This implies that the employees in possession of official accommodation are not entitled to draw house rent allowance. During the review of record of Virtual University (VU), Lahore, under the administrative control of Ministry of Information Technology, for the year 2009-10, Audit noted that four officers of the VU were allotted university accommodation but they also drew house rent allowance @ 45% of the basic pay. The expenditure on house rent allowance paid to these allottees amounted to Rs 5,538,700. Further, the 5% house rent charges were also not recovered from these allottees up to September 2010 as required under rules. Audit maintains that despite allotment of accommodation to these officers, the payment of 45% house rent allowance to them was irregular and in violation of above cited rule. Audit holds that the payment of house rent allowance to the employees caused a loss to the national exchequer. In response to audit observation, the management replied that The existing campus has six houses allotted to the staff to manage the semester system as well as uninterrupted VU TV transmission. They were allowed free accommodation to safeguard the Universitys interest. The reply is not satisfactory because allowing simultaneous payment of house rent allowance, provision of official accommodation to and non-deduction of 5% house rent charges from an official is not provided under rules. No DAC meeting was convened by the PAO till finalization of this Report. Audit recommends that (i) responsibility be fixed for this lapse (ii) payment of house rent allowance to the subject allottees be immediately stopped and (iii) recovery of unauthorized payment be made.

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16.4.1.2 Un-justified payment - Rs 22.37 million

on

hiring

of

vehicles

for

contract

staff

As per para-10 of GFR Vol-I, every public officer is expected to exercise the same vigilance in respect of expenditure incurred from public money as a person of ordinary prudence would exercise in respect of expenditure of his own money. Further as per para11 of GFR Vol-I each head of department is responsible for enforcing financial order and street economy at every step. During the review of record of the Virtual University (VU), Lahore, Audit noted that an expenditure of Rs 22.37 million was incurred on hiring of air conditioned vehicles for pick and drop facility extended to contractual staff, during the financial years 2008-10. Audit maintains that the decision of management to hire vehicles for pick and drop of contract employees was imprudent in view of the cost involved. The university could have bought its own transport, if the provision of facility to the employees was essential. However, the imprudent decision of the management caused a drain on national exchequer. In response to audit observation, the management replied that The existing premises is located at a considerable distance from Lahore. The majority of employees do not own conveyance therefore, the BoG decided to arrange to pick and drop facility to the staff. The university did not work on purchasing its own vehicles rather preferred to hire private vehicles. As per decision of the BoG Rs 50 are being charged from each employee who avails this facility. The reply is not satisfactory because hiring of vehicles for contract employees was not covered under the rules. No DAC meeting was convened by the PAO till finalization of this Report. Audit recommends that appropriate measures be taken to devise an effective plan to collect a reasonable amount from the beneficiaries.

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CHAPTER 17

17 MINISTRY OF INTERIOR 17.1 Introduction of Ministry The Ministry of Interior plays a significant role to make Islamic Republic of Pakistan, a country, where rule of law reigns supreme; where every Pakistani feels secure to lead a life in conformity with his religious beliefs, culture, heritage and customs; where a Pakistani from any group, sect or province respects the culture, tradition and faith of the other, where every foreign visitor feels welcome and secure. The Ministry of Interior has been assigned with the responsibility of maintaining law and order in the country. It also regulates the working of various security forces, including Police, to provide protection to the common man and to defend the country. It also deals in issuance of National ID cards and passports. Ministry of Interior consists of one division i.e. Interior Division. The departments attached with the Ministry of Interior are: Central Jail Staff Training Institute Civil Armed Forces Directorate General Civil Defence Federal Investigation Agency Immigration & Passport Islamabad Capital Territory National Police Foundation The National Response Center for Cyber Crimes

The autonomous bodies of the Ministry of Interior are: National Alien Registration Authority National Database and Registration Authority National Police Academy

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17.2

Comments on Budget & Accounts (Variance Analysis)

Grant wise detail of current and development expenditure is mentioned below: (Figures in Rupees)
Grant No 72 73 74 75 76 77 78 79 Grant Type Original Grant 387,191,000 3,895,983,000 757,678,000 13,206,709,000 2,844,964,000 504,316,000 6,366,387,000 1,515,083,000 29,478,311,000 6,703,245,000 6,703,245,000 36,181,556,000 Supplementary Grant 261,540,000 404,760,000 1,000 1,129,112,000 627,004,000 200,000 99,000,000 719,469,000 3,241,086,000 60,003,000 60,003,000 3,301,089,000 Final Grant 648,731,000 4,300,743,000 757,679,000 14,335,821,000 3,471,968,000 504,516,000 6,465,387,000 2,234,552,000 32,719,397,000 6,763,248,000 6,763,248,000 39,482,645,000 Expenditure 630,700,842 4,339,235,056 757,829,852 23,779,391,413 5,131,928,641 655,202,740 8,584,756,413 2,030,158,130 45,909,203,087 3,578,831,631 3,578,831,631 49,488,034,718 %age Excess / (Saving) Excess/ (Saving) (18,030,158) (2.78) 38,492,056 0.90 150,852 0.02 9,443,570,413 65.87 1,659,960,641 47.81 150,686,740 29.87 2,119,369,413 32.78 (204,393,870) (9.15) 13,189,806,087 40.31 (3,184,416,369) (47.08) (3,184,416,369) (47.08) 10,005,389,718 25.34

Current Current Current Current Current Current Current Current Subtotal 157 Development Subtotal Total

Audit noted that: There was an overall excess expenditure of Rs 10,005.39 million which was 25 percent of the final grant. In current expenditure, there was an excess expenditure of Rs 13,189.8 million, which was offset by saving in development expenditure of Rs 3,184.416 million. Supplementary grants obtained without careful cash forecasting In order to ensure prudent financial management, Para 13(vii) of System of Financial Control and Budgeting, 2006 states that Ministries / Divisions should be able to anticipate budgetary requirements well ahead of the financial year to which the budget relates and obtain the concurrence of the Finance Division. The Finance Division is expected to decline any request for supplementary grants except in extraordinary circumstances. This document further states that the funds obtained from supplementary grants shall be expended for the purposes for which these have been sanctioned. In current expenditure, demands for supplementary grants shall not be made, except in extraordinary circumstances. During the year, supplementary grants of Rs 3,301.089 million were obtained which were 9.2% of original allocation. According to Para 71 of General Financial Rules (Volume I), while framing budget estimates, the authorities should exercise utmost foresight. Variation between estimated and actual expenditure captures the level of foresight that goes into budget formulation. As shown in the graph below, the excess in current expenditure was 55.74%, which, after

163

accounting for supplementary grants decreased to 40.31%. In development expenditure, savings against original budget was 46.61% which changed to 47.08% when supplementary grants were taken into account.

17.3 Brief comments on the status of compliance with PAC Directives

Years Total No Of Paras Compliance Non-Complied % of compliance 2 2 0 100% 1987-88 0 0 0 1988-89 0 0 0 1989-90 4 4 0 100% 1990-91 28 22 6 79% 1991-92 20 16 4 80% 1992-93 13 13 0 100% 1993-94 21 11 10 52% 1994-95 3 1 2 33% 1995-96 1 1 0 100% 1996-97 0 0 0 1997-98 110 0 110 0% 1999-00 0 0 0 2000-01 21 0 21 0% 2001-02 8 8 0 100% 2006-07 11 8 3 73% 2008-09 Note: The report for the audit years 1998-99, 2002 2006, 2007-08 have not been discussed in the Public Accounts Committee (PAC)

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17.4 AUDIT PARAS 17.4.1 Fraud/Misappropriation 17.4.1.1 Unauthorized collection of funds, non-recording and utilization of accrued profit - Rs 2.69 million As per para 25 of General Financial Rules Vol-1, all department regulations involving financial character or have important financial bearing should be made by or with the approval of Ministry of Finance. Para 26 of GFR Vol-I, provides that it is the duty of the department controlling officer to see that all sums due to Government are regularly and promptly assessed, realized and duly credited in the public account. During the review of record of Commandant, Frontier Constabulary (FC), Peshawar, Khyber Pakhtunkhwa (KP), for financial year 2009-10, Audit noted that platoons of FC were deployed with private and public sector organizations for providing internal security on payment basis. The funds received from these organizations were deposited in various PLS bank accounts at the National Bank of Pakistan (NBP). Audit further observed that profits accrued against deposit in the above mentioned bank accounts from 01.01.2009 to 30.06.2009 were not accounted for in cash book in July 2009. The bank statements of various accounts indicated a net profit amounting to Rs 2,686,811. However, the bank statements for the period 17.07.2009 to 30.06.2010 were not produced to the Audit. Audit further noted bank statements of five other accounts maintained by Commandant, FC, wherein the amount (i) collected from two organizations in consideration of security duty and (ii) realized from unknown sources for other purposes; was deposited in commercial banks. The description of these accounts is mentioned below: i. ii. iii. iv. v. OGDC Dhodak Tullow Company Account of 10% Troops Welfare Fund Reward Account Stationery Account.

The statements in respect of these five accounts were neither produced to Audit nor recorded in the cash book.

165

Audit maintains that the collection and retention of receipt in bank accounts and nonrecording of profit earned thereon was in violation of cited rules and a fraudulent practice causing loss to the exchequer. In response to the observation, management replied that the accrued profits were erroneously not recorded in books of accounts. The reply is not satisfactory as the contents of the para have not been fully addressed. Further, no record of receipts and their deposit in the treasury has been provided to Audit. The DAC meeting was held on 27.01.2011, in which this para was not discussed. Audit recommends that responsibility be fixed, disciplinary action be initiated against officials responsible for this lapse. Further, the principal amount along with profit accrued be deposited in the treasury. 17.4.2 Non production of record 17.4.2.1 Non-production of record of reconciled receipt - Rs 515.51 million According to section 14 of Auditor-General's (Functions, Powers and Terms and Conditions of Service) Ordinance, 2001, the Auditor-General shall, in connection with the performance of his duties under this Ordinance, have authority to require that any accounts, books, papers and other documents which deal with, or form, the basis of or otherwise relevant to the transactions to which his duties in respect of audit extend, shall be sent to such place as he may direct for his inspection. Rule 77 (v) of the Federal Treasury Rules Vol-1 provides that money deposited in to Government Treasury through challans should be reconciled with the concerned Treasury to ensure that the amounts have actually been credited in to Government Account. During audit of the Ministry of Interior, the management did not provide any reconciled record of Rs 515,507,500 collected during the period from 28.03.2008 to 30.06.2009 on account of issuance of 88,838 new arms licenses to Audit in clear violation of cited rules. The detail of un-reconciled amounts follows:

166

Sr. No. 1 2

Description

Prohibited Bore Licenses Non-Prohibited Bore Licenses Total

No. of arms licenses 28,527 60,311 88,838

Rate (Rs) 7,500 5,000

Amount (Rs) 213,952,500 301,555,000 515,507,500

The non-provision of record to Audit was in violation of cited rules. Audit is of the view that the non-production of record and non-reconciliation of receipt, created adequate scope for embezzlement of public money. In response to the observation, the management replied that verification committee is about to complete the task with Federal Treasury Office, District Account Offices and Banks on board. The reply is not satisfactory as the reconciliation report and complete record of licenses issued has not been provided to Audit. The DAC meeting was held on 27.01.2011, which directed to reconcile the record and produce to Audit for verification. Audit recommends that responsibility be fixed, disciplinary action be initiated against officials responsible for this lapse under relevant Efficiency and Discipline Rules as required under Section 14(3) of Auditor-General's (Functions, Powers and Terms and Conditions of Service) Ordinance, 2001 and record be provided to Audit for review.

17.4.3 Irregularity & non compliance 17.4.3.1 Unauthorized retention - Rs 94.84 million As per para 25 of General Financial Rules Vol-1, all departmental regulations involving financial character or have important financial bearing should be made by or with the approval of Ministry of Finance. According to rule 7(1) of FTR all Government receipts should be deposited into Government account and all moneys received shall not be appropriated to meet departmental expenditure.

167

During the review of record of Commandant, Frontier Constabulary (FC), Peshawar, Khyber Pakhtunkhwa (KP), for financial year 2009-10, Audit noted that platoons of FC were deployed with private and public sector organizations for providing internal security. Audit observed that the FC collected unauthorized charges from various organizations. In addition to the actual charge for providing troops, FC also collected, without any authorization, ten percent additional charge as Troops Welfare Fund (TWF). The amount collected on this count as per the cash book was Rs 40,144,723 during 200910. Audit further observed that the closing balance of Troops Welfare Fund (TWF), as on 30.06.2010, was Rs 91,820,041 as detailed below: Description Opening balance as on 01.07.2009 Addition during 2009-10 Total available funds during the year Less: Expenditure during the year Closing balance Amount (Rs) 54,695,418 40,144,723 94,840,141 (3,020,100) 91,820,041

Audit observed that the subject funds were retained in a commercial bank account and expenditure was incurred from the account in violation of the cited rule. However, the bank statements were not produced to Audit for further review. Audit holds that funds generated by deployment of troops and as TWF and their utilization was unauthorized and thus against the cited rules. The adoption of above practices may cause leakages and may make the public funds vulnerable to misuse. The management replied that generation of TWF had been under the Prime Ministers directives, hence comments could be offered once a decision from the Prime Minister is received. The reply is not satisfactory as no documentary evidence was provided to Audit in support of the managements contention. The DAC meeting was held on 27.01.2011, in which this para was not discussed. Audit recommends that collection of 10% TWF may be discontinued. Further, the principal amount along with profit accrued be deposited in the treasury.

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17.4.3.2 Irregular retention of public money in private accounts - Rs 251.87 million According to Para-7 of GFR Vol-I, unless otherwise clearly authorized by any law or rule or order having the force of law, money may not be removed from the public account for investment or deposit elsewhere without consent of the Ministry of Finance. Para 96 of GFR Vol-I stipulates that money may not be spent merely because it is available or to avoid the lapse of grant. During the review of record of the Inspector General Frontier Corps (IGFC) Peshawar, Khyber Pakhtunkhwa (KP) for the financial year 2009-10, Audit observed that the management drew an amount of Rs 251,865,041 on account of purchase of various items at the close of the financial year and deposited in to private bank account No.13375-8 in violation of cited rules. The detail of drawls is given below: Cheque No 3303675 3303677 3303671 3303676 2436086 2249078 2247641 3302997 Date 29.6.2010 30.6.2010 30.6.2010 30.6.2010 30.6.2010 23.4.2010 5.4.2010 14.6.2010 Description Purchase of live stock Purchase of transport Purchase of transport Purchase of transport Purchase of transport Purchase of Mules Purchase of Mules Purchase of Mules Total Amount (Rs) 2,187,900 7,157,764 201,780,000 31,440,000 8,360,000 939,377 2,709,920 410,010 251,865,041

Audit maintains that the adoption of reported practice might have caused leakage in the public funds. When the matter was reported to the management, they replied that the amount on account of purchase of transport and mules was drawn and deposited into IGFC current account No.13375-8 to avoid lapse of fund and would be paid to the firms concerned on completion of supplies of vehicles and mules. The reply is not satisfactory as fraudulent drawl of funds and their subsequent deposit in private bank account cannot be justified on any pretext. The DAC meeting was held on 27.01.2011, in which this para was not discussed.

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Audit recommends that responsibility be fixed, disciplinary action be initiated against officials responsible for this lapse. Further, the principal amount along with profit accrued, if any, be deposited in the treasury. 17.4.3.3 Irregular payment on account of purchase of vehicles - Rs 248.73 million As per Cabinet Division OM No.6-7/02-M-II dated 22.07.2005, new vehicles can be purchased with the approval of Vehicle Committee constituted by the Federal Government under the Chairmanship of Additional Secretary (Exp) Finance Division by inviting open tenders. According to Para 7 of GFR Vol-I, unless otherwise clearly authorized by any law or rule or order having the force of law, money may not be removed from the public account for investment or deposit elsewhere without consent of the Ministry of Finance. During the review of record of Frontier Constabulary (FC), Peshawar, Khyber Pakhtunkhwa (KP), Audit noted that, an expenditure of Rs 248,737,764 was incurred on purchase of 72 vehicles, during the financial year 2009-10, as detailed below:
Cheque # 3303676 3303671 3303677 3303673 Date 29.6.10 29.6.10 29.6.10 29.6.10 Particulars Land Rover, Defender (4x4) Land Rover Defender 130 Land Rover Defender Land Rover Defender Rate 4,180,000 3,930,000 3,363,000 3,578,882 Total Qty 2 8 60 2 72 Cost (Rs) 8,360,000 31,440,000 201,780,000 7,157,764 248,737,764

Audit observed the following irregularities in this purchase: i. ii. The subject amount was drawn in advance and credited to a bank account of IGFC, Peshawar Authorized strength of vehicles was not provided to Audit

Audit maintains that the procurement of imported vehicles was in violation of cited rules. Further, the drawl of advance and its transfer to a private bank account before payment to the vendor was irregular. Audit holds that the adoption of reported practices may make the public funds vulnerable to misuse. When communicated to the management, they replied, all vehicles were authorized by the HQ, FC, for which funds were released in accordance with formula of the Finance Division

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20%, 20%, 30%, and 30% therefore the vehicle could not be purchased in beginning of the financial year. The reply is not satisfactory in the absence of approval of the Cabinet Division for procurement of foreign assembled vehicles. Further, other points raised in the observation have not been addressed. The DAC meeting was held on 27.01.2011, in which this para was not discussed. Audit recommends that responsibility be fixed, disciplinary action be initiated against officials responsible for placement of funds in commercial bank account. 17.4.3.4 Irregular promotion on acting charge basis of the regular employees against project posts Policy guidelines issued by Establishment Division vide O.M No. 6/2/2000-R.3 dated 6.5.2000 for contract appointments clearly mention that for project which have a limited life, appointments may be made on contract basis by the prescribed appointing authority after open advertisement of vacancies. The advertisements should indicate prescribed academic and professional qualifications, experience, age, provincial/regional quotas, special quotas etc, where applicable, as per rule/ government policy. Rule 8-B (1) of the Civil Servants (Appointment, Promotion, Transfer) rules 1973, which confers the admissibility of acting charge promotion to the senior civil servant belonging to the Cadre or service concerned. The relevant provision is reproduced as below: Where the appointing authority considers it to be in the public interest to fill a post reserved under the rules for departmental promotion and the most senior civil servant belonging to the Cadre or service concerned who is otherwise eligible for promotion does not possess the specified length of service the authority may appoint him to that post on acting charge basis. During the review of record of Machine Readable Passport (MRP) project under the Ministry of Interior for the financial year 2008-09, Audit noted that a number of regular employees were inducted in the MRP project contrary to the provisions laid down in the PC-I, wherein it was categorically mentioned that the appointments will be made on government pay scale on contract basis. Detail of posts filled is given below:

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S. No

Name of Post

1 2 3 Total

Deputy Director Assistant Director Dy. Assistant Director

Sanctioned Posts as per PC-I 6 32 27 65

Post filled by Promotion 6 16 18 40

Audit noted that the above 40 posts have been filled through promotion on acting charge basis of the existing staff of Directorate General, Immigration & Passport (I&P) which is contrary to the provision laid down in the PC-I. Audit further noted that after promotion of 18 regular Deputy Assistant Directors (B-16) of Directorate General Immigration & Passport as Assistant Director (B-17) on ad hoc basis, against the Project Posts in MRP (Phase-II) these posts of Deputy Assistant Directors (B-16) were filled by allowing acting charge promotion to 16 Superintendents, 3 Stenographers, 4 Assistants and 4 Steno typists. Similarly posts vacated due to acting charge promotions of above four cadres, were filled through acting charge promotion of Steno-typist (B-12) to Stenographer (B-15), and UDC (B-7) to Superintendent (B-10), Assistant (B-14). The posts so vacated by UDCs (B-7) were filled by allowing acting charge to LDC (B-5). Audit holds that project posts were required to be filled initially for a period of 2 years and thereafter these posts were to be transferred to current budget of Directorate General of Immigration & Passports after creation of posts in their sanctioned strength. Despite lapse of two years these posts have not been created in current budget. Furthermore, in case the department fails to get the posts created from Ministry of Finance, the promoted officers will have to revert to their original positions, whereby sufficient vacancies will not be available to adjust them. Audit maintains that promotion of regular staff of the Directorate General of Immigration Passports against the project posts is irregular and unjustified. The un-authorized promotions in the project put an extra burden on the exchequer. In response to audit observation, the management replied that approval of FPSC and Secretary Interior was obtained prior to appointment of officers on acting charge basis. However, matter has already been taken up with the Ministry of Finance for creation /

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sanction of posts on regular basis on the basis of recommendations of MS Wing of Establishment Division. The reply of the management is not satisfactory as the promotions were made against project posts which were not covered under the rule. The DAC meeting was held on 27.01.2011, which directed that the case may be referred to the competent authority for regularization. Audit recommends that these promotions be reverted, difference of pay accruing from the unauthorized promotions be calculated and recovered and disciplinary actions be taken against the officials responsible for violation of rules and regulations. 17.4.4 Internal control weaknesses 17.4.4.1 Irregular payment of taxes - Rs 39.98 million According to clause (3) of the Special Conditions of the contract agreement executed on 14-04-2010 the supplier was supposed to supply the arms/ammunitions within 60 days. During the review of record of Commandant, Frontier Constabulary (FC), Peshawar, Khyber Pakhtunkhwa (KP), for the financial year 2009-10, Audit noted that arms/ammunition under the above cited contract had not been received by the FC until September 2010, whereas these should have been received by June 12, 2010. Audit further noted that an amount of Rs 39,980,303 was drawn from Government treasury on account of various taxes levied on arms/ammunition purchased. Audit maintains that the payment of Rs 39,980,303 on account of various taxes could not be verified without the receipt of goods. The management replied that the amount had been deposited in the NBP Dry Port Branch Peshawar for custom clearance of the Custom Duty. It was further stated that the items had been received. The reply is not satisfactory in the absence of any evidence of receipt of goods and payment of taxes. The DAC, in its meeting held on 27.01.2011, directed to inquire the matter thoroughly. Audit recommends that decision of the DAC be implemented.

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17.4.4.2 Reimbursement of US$ 13.368 million on account of contingent owned equipment not received from the United Nations Para 26 of GFR provides that subject to any special arrangement that may be authorized by competent authority with respect to any particular class of receipts, it is the duty of the departmental controlling officers to see that all sums due to Government are regularly and promptly assessed, realized and duly credited in the public account. According to rule 7(1) of FTR all Government receipts should be deposited into Government account and all moneys received shall not be appropriated to meet departmental expenditure. During the review of record of Ministry of Interior for the financial years 2008-10, Audit noted that an amount of USD 13.368 million was yet to be received from the U.N on account of expenditure in respect of contingent-owned equipment as detailed below:
Mission Kosovo Haiti Timor Leste Cote d Ivoire Period 01.07.2004 to 31.01.2009 01.09.2008 to 31.05.2009 01.10.2007 to 31.05.2009 01.07.2007 to 31.05.2009 Total Approximately as per previous claim (US$) 6,684,106 1,093,763 2,795,171 2,795,171 13,368,211

Audit maintains that non-collection of receipt outstanding since long from U.N was in violation of cited rule and a loss to the exchequer. In response to the audit observation, the management replied that the matter is pursued regularly and receipt from UN will be intimated to Audit as and when received. The DAC meeting was held on 27.01.2011, which directed that the recovery be made on priority basis. Audit recommends that the decision of the DAC be implemented.

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17.4.4.3 Non-recovery on account of deployment of FC, KP, Platoons with Government of Sindh, Balochistan, Gilgit-Baltistan and WAPDA - Rs 878.35 million Para-26 of GFR Vol-I provides that it is the duty of the departmental controlling officer to see that all sums due to Government are regularly and promptly assessed, realized and duly credited in the public account. During review of the record of Frontier Constabulary (FC), Peshawar, Khyber Pakhtunkhwa, for 2009-10, Audit observed that the following provincial governments and WAPDA owed a sum Rs 878.352 million to FC as detailed in the following table:
Sr. No. 1 2 3 Name of department WAPDA Government of Sindh & Gilgit Baltistan Government of Balochistan Total Amount (Rs in million) 36.00 296.00 546.35 878.35

Audit maintains that non-receipt of outstanding dues was a financial loss to the national exchequer. In response to the audit observation, the management replied that all quarters concerned had been requested to provide outstanding amounts and the Audit would be informed accordingly. The DAC meeting was held on 27.01.2011, which directed the management to hold an inquiry and submit the report within a month time. Audit recommends that recovery be made from all concerned and deposited into Government Treasury.

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CHAPTER 18

18 NATIONAL ASSEMBLY SECRETARIAT 18.1 Introduction of Secretariat The Constitution of the Islamic Republic of Pakistan 1973, provides for a Federal Parliamentary System of government, with President as the Head of State and the popularly elected Prime Minister as Head of Government. The Federal Legislature is a bicameral Majlis-e-Shoora (Parliament), composed of the National Assembly and the Senate. The Constitution also provides for the President to address the two Houses assembled together at the commencement of the first session after General Elections. The National Assembly enjoys exclusive powers to consider Money bills including the annual budget. The National Assembly also provides a minimum of three-fourth of the Cabinet strength and the member who enjoys the confidence of the majority in this august House is invited by the President to be the Prime Minister and form the Government. The Prime Minister is, therefore, a member of the National Assembly who enjoys the support of the majority of the members in the House. The cabinet is also collectively responsible to the Assembly alone. The most hectic session coincides with the passage of the Federal Budget in May/June, every year. 18.2 Comments on Budget & Accounts (Variance Analysis) Grant wise detail of current expenditure of National Assembly is mentioned below: (Figures in Rupees)
Grant No 93 Grant Type Current Total Original Grant 1,301,449,000 1,301,449,000 Supplementary Grant 2,141,000 2,141,000 Final Grant 1,303,590,000 1,303,590,000 %age Excess / (Saving) Excess/ (Saving) 1,266,189,167 (37,400,833) (2.87) 1,266,189,167 (37,400,833) (2.87) Expenditure

Audit noted that there was a saving of Rs 37.4 million which was 2.87 percent of the final grant, which depicted that budget were forecasted carefully.

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Supplementary grants obtained without careful cash forecasting In order to ensure prudent financial management, Para 13(vii) of System of Financial Control and Budgeting, 2006 states that Ministries / Divisions should be able to anticipate budgetary requirements well ahead of the financial year to which the budget relates and obtain the concurrence of the Finance Division. The Finance Division is expected to decline any request for supplementary grants except in extraordinary circumstances. This document further states that the funds obtained from supplementary grants shall be expended for the purposes for which these have been sanctioned. In current expenditure, demands for supplementary grants shall not be made, except in extraordinary circumstances. During the year, supplementary grants of Rs 2.141 million were obtained which was 0.16% of original allocation. According to Para 71 of General Financial Rules (Volume I), while framing budget estimates, the authorities should exercise utmost foresight. Variation between estimated and actual expenditure captures the level of foresight that goes into budget formulation. As shown in the graph below, the saving in current expenditure was 2.71%, which, after accounting for supplementary grants changed to savings of 2.87%.

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18.3 Brief comments on the status of compliance with PAC Directives

Years Total No Of Paras Compliance Non-Complied % of compliance 0 0 0 1987-88 0 0 0 1988-89 0 0 0 1989-90 0 0 0 1990-91 0 0 0 1991-92 0 0 0 1992-93 0 0 0 1993-94 0 0 0 1994-95 0 0 0 1995-96 10 0 10 0% 1996-97 0 0 0 1997-98 0 0 0 1999-00 0 0 0 2000-01 0 0 0 2001-02 0 0 0 2006-07 0 0 0 2008-09 Note: The report for the audit years 1998-99, 2002 2006, 2007-08 have not been discussed in the Public Accounts Committee (PAC)

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18.4 AUDIT PARAS 18.4.1 Irregularity & non compliance 18.4.1.1 Non-accountal of expenditure incurred on air tickets Rs 252.60 million In pursuance of sub-section 2A of the Section-10 of Members of Parliament (Salaries and Allowance) Act, 1974, a member is entitled to fifteen business class open return air tickets from the airport nearest to his constituency to Islamabad during the financial year. National Assembly Secretariat released Rs 252,604,445 to Pakistan International Airlines (PIA) during 2007-08, 2008-09 and 2009-10 for the purchase of air tickets issued to Members of National Assembly (MNAs) against their privileges but secretariat has no record of actual utilized air tickets as neither the members of the National Assembly returned the used tickets to the secretariat nor PIA intimated/informed the details of actual utilized tickets whereas this arrangement was made only for one financial year. The detail of air tickets issued during the last three years is provided below:
S. No. 1 2 3 4 5 Period 1st July to 15th Nov 2007 17th March to 30th June, 2008 1st July to 31st December 2008 1st January to 30th June 2009 1st July 2009 to 30th Jun 2010 No. of MNA 226 269 281 230 342 Total Number of air tickets issued to each MNA Five open return air tickets and one single Four open return air tickets Seven open return air tickets Eight open return air tickets 15 open return air tickets Total amount of tickets (Rs) 27,702,325 29,719,680 49,962,450 47,258,990 97,961,000 252,604,445

Audit noted that under the provision of existing Act, the Secretariat provided privileges air tickets according to the proportionate period during financial year 2007-08. It is stated that 1st July, 2007 to 15th Nov. 2007 (Previous Assembly) and 17th March to 30th June & 1st July to December, 2008 (Present Assembly), the PIA had issued air tickets on

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Coupon Paper for MNAs and no office record is available in PIA to check its utilization by the MNAs, whereas numbers of air tickets are available on the PIA invoices/records. Audit further observed that the Secretariat arranged eight privileged air tickets from PIA for the period from 1st January to 30th June, 2009 for the MNAs on proportionate basis which could not be checked on the record of PIA after close of the financial year 200809. Some MNAs surrendered their tickets to Secretariat and they were passed on to PIA for refund/adjustment the amount in the sanctions. The present position of payment made to PIA against their invoices of air tickets is given below:

S. No.

Period

Total amount of invoice (Rs) 27,702,325 29,719,680 49,962,450 47,258,990 Total 154,643,445

1. 2. 3. 4.

1st July to 15th Nov 2007 17 March to 30 June, 2008 1 July to 31 December, 2008 1st June to 30thJune, 2009
st st th th

Payment made to PIA after deduction against un-used air tickets (Rs) 23,404,520 28,276,115 49,353,962 45,951,286 146,985,883

Audit maintains that the management has failed to frame a proper mechanism to reconcile the expenditure actually charged to government account. This has resulted in loss to exchequer, which cannot be monetized in the absence of relevant record. In response, the management replied that the case for issuance of PIA Credit Cards in lieu of air tickets and travel vouchers to the Honourable MNAs is under submission / process to the higher authority. The reply is not satisfactory as the case is a mere proposal, while there is need for a substantive and immediate action to address the issue. The DAC meeting was held on 27.01.2011. The DAC decided to constitute a committee to evolve mechanism to indentify the actual utilization of air tickets.

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Audit recommends that the management needs to devise a mechanism to reconcile the amount paid to PIA against issuances of bulk air tickets and recover the amount of unused air tickets from PIA. 18.4.1.2 Non-recovery of privilege travel vouchers/cash allowance - Rs 3.30 million In pursuance of sub-section (1),(2) & )(2A) of the Section 10 of the Member of Parliament (salaries and allowances) act, 1974, a member is entitled to receive travel vouchers of Rs 150,000 or cash allowance of Rs 90,000 and fifteen business class open return air tickets from the airport nearest to this constituency to Islamabad during each financial year. According to the above mentioned provision of the Act, a member of the parliament is entitled to these facilities only for the portion of the financial year for which he/she holds that seat. National Assembly has been providing privilege travel vouchers of Rs 150,000, cash allowance of Rs 90,000 and 15 business class return air tickets to MNAs during each financial year. Audit noted that a number of MNAs inducted in the Federal Cabinet and Advisors who resigned from the seat of MNA also received above privileges in the capacity of MNA, although they were not entitled to avail such privileges. The total amount on this account comes to Rs 3.3 million. Audit noted that the management was not exercising oversight vigilantly in violation of quoted rules. The management replied that 22 ex-MNA have been requested for recovery of Rs 821,345, whereas two MNAs have refunded Rs 179,810. Further, two MNAs had passed away and the case of recovery of their dues is under process with their families. Similarly, three Ministers out of 31 had submitted certificates regarding utilization of their privileges. The DAC meeting was held on 27.01.2011, which decided to recover the remaining amount. Audit recommends that the decision of the DAC be implemented.

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CHAPTER 19

19 MINISTRY OF PETROLEUM AND NATURAL RESOURCES 19.1 Introduction of Ministry Petroleum & Natural Resources Division was created in April 1977. Prior to that Petroleum and Natural Resources was part of the Ministry of Fuel, Power and Natural Resources. The Ministry is responsible for dealing with all matters relating to petroleum, gas and mineral affairs and its functions are as follows: Policy, legislation, planning regarding exploration, development and productions Policy guidelines to regulatory bodies in oil and gas sectors Policy guidelines and facilitation of import, export, refining, distribution, marketing, transportation and pricing of all kinds of petroleum and petroleum products Matters bearing on international aspects Federal agencies and institutions for promotion of special studies and development programmes Facilitate the development of petroleum and mineral sectors Attract the private investment Administration of regulation of mines and oil fields and mineral development (Federal Control) Act, 1948, and rules made there under, in so far as the same relate to exploration and production of petroleum, transmission, distribution of natural gas, compressed natural gas, liquefied natural gas and liquefied petroleum gas, refining and marketing of oil Petroleum concessions agreements for land, off-shore and deep sea areas; Facilitation of import of machinery equipment etc. for exploration and development of petroleum and minerals Administration of Marketing of Petroleum Products (Federal Control) Act 1974 and the rules made there-under Matters relating to Federal investments and undertakings wholly or partly owned by the Government in the field of oil, gas and minerals Coordination of energy and mineral policies Research, development, deployment and demonstration of hydrocarbon energy resources Secretariat of Mineral Policy Committee

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19.2 Comments on Budget & Accounts (Variance Analysis) Grant wise detail of current and development expenditure is mentioned below: (Figures in Rupees) %age Grant Supplementary Grant Type Original Grant Final Grant Expenditure Excess / (Saving) Excess/ No Grant (Saving) 97 Current 169,830,000 192,004,000 361,834,000 332,981,810 (28,852,190) (7.97) 98 Current 247,432,000 7,000 247,439,000 240,177,390 (7,261,610) (2.93) 99 Current 66,000,000 66,000,000 66,000,000 Subtotal 483,262,000 192,011,000 675,273,000 639,159,200 (36,113,800) (5.35) 164 Development 1,836,144,000 6,548,959,000 8,385,103,000 2,515,646,575 (5,869,456,425) (70.00) 184 Development 538,185,000 22,000 538,207,000 174,830,433 (363,376,567) (67.52) Subtotal 2,374,329,000 6,548,981,000 8,923,310,000 2,690,477,008 (6,232,832,992) (69.85) Total 2,857,591,000 6,740,992,000 9,598,583,000 3,329,636,208 (6,268,946,792) (65.31) Audit noted that: There was an overall saving of Rs 6,268.95 million which was 65 percent of the final grant. In development expenditure, there was a saving of Rs 6,232.946 million, which was 87 percent of the supplementary grant, which depicted that supplementary grants were demanded in excess.

Supplementary grants obtained without careful cash forecasting In order to ensure prudent financial management, Para 13(vii) of System of Financial Control and Budgeting, 2006 states that Ministries / Divisions should be able to anticipate budgetary requirements well ahead of the financial year to which the budget relates and obtain the concurrence of the Finance Division. The Finance Division is expected to decline any request for supplementary grants except in extraordinary circumstances. This document further states that the funds obtained from supplementary grants shall be expended for the purposes for which these have been sanctioned. In current expenditure, demands for supplementary grants shall not be made, except in extraordinary circumstances. During the year, supplementary grants of Rs 6,740.99 million were obtained which were 290% of original allocation. According to Para 71 of General Financial Rules (Volume I), while framing budget estimates, the authorities should exercise utmost foresight. Variation between estimated

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and actual expenditure captures the level of foresight that goes into budget formulation. As shown in the graph below, the excess in current expenditure was 32.26%, which, after accounting for supplementary grants changed to savings of 5.35%. In development expenditure, excess against original budget was 13.32% which changed to saving of 69.85% when supplementary grants were taken into account.

19.3 Brief comments on the status of compliance with PAC Directives

Years Total No Of Paras Compliance Non-Complied % of compliance 2 0 2 0% 1987-88 5 2 3 40% 1988-89 0 0 0 1989-90 1 0 1 0% 1990-91 0 0 0 1991-92 3 2 1 67% 1992-93 2 2 0 100% 1993-94 4 0 4 0% 1994-95 4 3 1 75% 1995-96 0 0 0 1996-97 0 0 0 1997-98 0 0 0 1999-00 52 35 17 67% 2000-01 0 0 0 2001-02 1 0 1 0% 2006-07 3 0 3 0% 2008-09 Note: The report for the audit years 1998-99, 2002 2006, 2007-08 have not been discussed in the Public Accounts Committee (PAC)

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19.4 AUDIT PARAS 19.4.1 Irregularity & non-compliance 19.4.1.1 Unauthorized payment on account of service charges - Rs 1.73 million According to Para 10 of GFR Vol-1, every officer incurring or authorizing expenditure from public funds should be guided by high standards of financial propriety and every public officer is expected to exercise the same vigilance in respect of expenditure incurred from public moneys as a person of ordinary prudence would exercise in respect of expenditure of his own money. The Ministry of Petroleum and Natural Resources identified a space of 5,323 sq.ft. in 1st floor of Muhammadi Plaza, Plot No. 4, G-6, Civic Centre, Islamabad for hiring as office accommodation for the Ministrys offices. The owner agreed to rent out the space @ Rs 37 per sq.ft. per month. The case was referred to Finance Division to seek approval of the rent rate of Rs 37 per sq.ft. per month (p.m.) in relaxation of instructions issued vide Finance Division. Finance Division (Regulation Wing) vide its No. 8/50/R-14/07 dated 9th April 2007 allowed the Ministry of Petroleum and Natural Resources, Islamabad to hire the building and agreed for a rent up to Rs 28 per sq.ft. p.m. subject to completion of all codal/procedural formalities to be checked by FA Organization and availability of funds. Audit observed that the Ministry of Petroleum and Natural Resources had signed a lease agreement with the owner on 01-04-2007 for a period of 03 years to hire the subject space. The difference of the rent demanded by owner (Rs 37 per sq.ft. p.m.) and rent agreed by Finance Division (Rs 28 per sq.ft. p.m.) was covered and paid by the Ministry by allowing Rs 9 (per sq.ft. p.m.) as Service Charges. Resultantly, the Ministry paid the owner @ Rs 149,296 p.m. as rent and also Rs 47,988 p.m. as rent (termed as service charges i.e. cleaning and parking, etc.). The Ministry overpaid an amount of Rs 1,727,568 (Rs 47,988 x 36 months) for the period from 01-04-2007 to 31-03-2010 as service charges which was actually the amount to which the Finance Division had not agreed. Audit observes that the payment of service charge was meant to inflate the total amount of rent paid to the landlord, which was unjustified and thus in violation of cited rule. The overpayment resulted in loss to the exchequer. In response, the management replied that the Ministry hired the building w.e.f. 01-042007 for a period of three years as per lease agreement @ Rs 37 per sq.ft. (rent up to

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Rs 28 per sq.ft., service charges @ Rs 9 per sq.ft. to adjust the difference). The service charges @ Rs 9 per sq.ft. were paid to the owner with the approval of the Finance Division (FAs Organization). Therefore, the payment of service charges to the owner of Muhammadi Plaza is justifiable as it has the approval of Finance Division. The reply is not tenable. The payment of rent difference amounting to Rs 1,727,568 on account of rent demanded by owner and rent agreed/allowed by Finance Division in the shape of service charges is unauthorized. The garage, security and cleaning staff were not provided by the owner for which he was paid service charges irregularly. The DAC meeting held on 28-01-2011, which directed that an inquiry be made to ascertain the justification within 4 weeks and results be intimated to Audit. Audit recommends that the decision of the DAC be implemented. 19.4.1.2 Recovery of unadjusted contingent advances against official- Rs 9.39 million Rule 290 of FTR states that no amount be drawn from public account unless it is required for immediate disbursement/expenditure. In terms of rule 308 of FTR and 269 of GFR Vol. I the advances should be adjusted through bills immediately on return to headquarter or by the 30th June of the financial year whichever is earlier. During scrutiny of record of the Geological Survey of Pakistan, Quetta, Audit noted that management had paid Rs 9,395,849 as contingent advances to its officials in various years from regular and project budget. However, the adjustment against these advances was pending since 8 to 10 years. The summarized data pertaining to such advances by GSP formations/projects, as on 30th June 2010, is provided in the following tables:
Sr. 1 2 3 4 Name of Formations Regular/Current side of GSP Chamalang Coal Project Accelerated Geological Mapping Project Ground Follow-up of Aeromagnetic Project Total Unadjusted Advances (Rs) 1,866,745 3,114,735 2,322,115 2,092,254 9,395,849

Audit holds that non-adjustment of advances is against canons of financial propriety as mentioned in the cited rules. Audit maintains that the veracity of expenditure incurred from the contingent advances cannot be verified in the absence adjustment accounts.

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The DAC meeting was held on 28-01-2011. The management informed that recovery of an amount of Rs 1,084,870 had been made. The DAC directed that the remaining outstanding amounts be recovered immediately. Audit recommends that the decision of DAC be implemented. 19.4.1.3 Irregular withdrawal of TA/DA -Rs 1.09 Million In terms of para-2 of Cabinet Division letter No. F.9-148/2002-Min dated 19-02-2003 visits abroad by Members of the National Security Council, Federal Ministers, Minister of State, Advisors, Special Assistants to the Prime Minister, persons holding status of Federal Minister or Minister of State without Cabinet rank, Provincial Governors, Secretaries/Additional Secretaries Incharge of the Ministries/Divisions and Head of autonomous/semi-autonomous bodies and corporations in MP-I scale will require prior approval of the Prime Minister. Contrary to the above mentioned provisions of Cabinet Division letter dated 19-02-2003, the Special Secretary, Ministry of Petroleum and Natural Resources visited Doha (Qatar), Dubai, London and Paris without approval of the Prime Minister. An amount of Rs 1,086,455 was claimed by the officer and the same was paid to him. Audit is of the view that as the officer visited abroad without approval of the Prime Minister, therefore, expenditure on his TA/DA in connection with visit abroad amounting to Rs 1,086,455 was in violation of cited rule. The irregularity caused burden on the exchequer. In response to audit observation, the management replied that the former Special Secretary, P&NR has informed that in view of the importance of the project, a system was evolved with the approval of Finance Division to undertake such visits with the approval of Minister In-charge. The reply is not satisfactory as it only purports to exclude the management of its responsibility to evade its role in financial oversight. The DAC meeting was held on 28-01-2011, in which the PAO directed that an inquiry be made to ascertain the justification within 4 weeks and results be intimated to Audit. Audit recommends that the decision of DAC be implemented.

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CHAPTER 20

20 MINISTRY OF PORTS AND SHIPPING 20.1 Introduction of Ministry In view of paramount importance of the marine sector, Ministry of Ports & Shipping was created on 2nd September 2004. Thanks to rapid development of Information and Communication technologies, the trend of globalization has gained momentum which is characterized by containerization of liner shipping. Our ports, especially the Gwadar Port have all the potential of becoming a hub of marine transportation. The geographical location and trade routes leading to Central Asia provide a long cherished link with these states. Asia-Pacific countries in our close vicinity have developed Shanghai and Busan, as regional hub ports. Likewise, the ports at Mumbai and Dubai have fullest potential of regional hub ports. In the given scenario, we need to develop Gwadar Port as a versatile port equipped with all the amenities of a hub port including Trade Processing Zone and Free Trade Zone etc. Ministry of Ports & Shipping aims to rationalize port tariffs/Freight rates including Terminal Handling Charges, promotion of private investments and public engagement in port and shipping sector. The following objectives have been envisaged for the Ministry and its organizations: 1. Promote international competitiveness of our exports and increase operational effectiveness to meet the challenges of globalization 2. Rationalization of port charges 3. Enhanced capacity for handling dry and liquid cargo and its faster clearance 4. 24 Hours port operations

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20.2 Comments on Budget & Accounts (Variance Analysis) Grant wise detail of current and development expenditure is mentioned below: (Figures in Rupees)

Grant Grant Type No 102 185 Current Development Total

Original Grant 335,765,000 578,810,000 914,575,000

Supplementary Grant 1,834,000 2,000 1,836,000

Final Grant 337,599,000 578,812,000 916,411,000

Expenditure 162,147,569 148,695,380 310,842,949

Excess / (Saving) (175,451,431) (430,116,620) (605,568,051)

%age Excess/ (Saving) (51.97) (74.31) (66.08)

Audit noted that: There was an overall saving of Rs 605.568 million which was 66 percent of the final grant, which depicted that budgeting was made in excess that resulted in blockage of funds.

Supplementary grants obtained without careful cash forecasting In order to ensure prudent financial management, Para 13(vii) of System of Financial Control and Budgeting, 2006 states that Ministries / Divisions should be able to anticipate budgetary requirements well ahead of the financial year to which the budget relates and obtain the concurrence of the Finance Division. The Finance Division is expected to decline any request for supplementary grants except in extraordinary circumstances. This document further states that the funds obtained from supplementary grants shall be expended for the purposes for which these have been sanctioned. In current expenditure, demands for supplementary grants shall not be made, except in extraordinary circumstances. During the year, supplementary grants of Rs 1.84 million were obtained which were 0.19% of original allocation. According to Para 71 of General Financial Rules (Volume I), while framing budget estimates, the authorities should exercise utmost foresight. Variation between estimated and actual expenditure captures the level of foresight that goes into budget formulation. As shown in the graph below, the saving in current expenditure was 51.71%, which, after accounting for supplementary grants changed to savings of 51.97%. In development expenditure, savings against original budget was 74.31% which remained at 74.31% when supplementary grants were taken into account.

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20.3 Brief comments on the status of compliance with PAC Directives

Years Total No Of Paras Compliance Non-Complied % of compliance 0 0 0 1987-88 0 0 0 1988-89 0 0 0 1989-90 0 0 0 1990-91 0 0 0 1991-92 0 0 0 1992-93 0 0 0 1993-94 0 0 0 1994-95 0 0 0 1995-96 0 0 0 1996-97 0 0 0 1997-98 0 0 0 1999-00 0 0 0 2000-01 0 0 0 2001-02 4 0 4 0% 2006-07 0 0 0 2008-09 Note: The report for the audit years 1998-99, 2002 2006, 2007-08 have not been discussed in the Public Accounts Committee (PAC)

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20.4 AUDIT PARAS 20.4.1 Non production of record 20.4.1.1 Non-production of record/information relating to lease of land to two housing schemes In terms of Section 14 of the Auditor-Generals Ordinance 2001 and Para-17 of GFR Vol-I, it is the duty of every Department/Controlling Officer to afford all reasonable facilities to the audit in the discharge of their duty and to furnish the fullest possible information which they may ask for in connection with the preparation of an account or report which it is their duty to prepare. No information or book should be withheld, which is the statutory right of the Audit to see on behalf of the Auditor-General of Pakistan. Section 29A of Karachi Port Trust (Amendment) Ordinance 2001, states that in order to carry out the purpose of this Act, the Board of Trustees may, with the approval of the Federal Government rent, lease, buy, own, acquire, mortgage and dispose of such property, real or personal, as the Board may deem proper to carry out the purposes of this Act. During the review of record of Karachi Port Trust (KPT), under the administrative control of Ministry of Ports & Shipping, Audit observed that: a. In 1996 and 2006, the KPT leased out 380 acres of land to two housing societies as per following detail: i. 130 Acres at Mai Kolachi, Bypass Express Way connecting M.T.Khan Road to Khayaban-e-Roomi, KDA Scheme No-5 Clifton to KPT Officers Co-operative Housing Society for 99 years at a ground rent of 10 paisa/sq.yard per annum ii. 250 Acres (Equivalent to 1011715 Sq Meters) at Hawks Bay Road at a ground rent of 10 paisa/sq. meter per annum to United Workers Front of KPT Cooperative Housing Society, Karachi for 99 years lease in order to sub-lease the plots to the employees of the KPT. b. The subject land was included in the limits of the Port exclusively for convenience of shipping and cargo traffic, safety of vessels and improvement, maintenance and good governance of KPT as per notification No.SRO. 307 (KE)/91 dated

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05.10.1991of the Ministry of Communications (Ports and Shipping Wing). Therefore this land could not be divested to housing societies. c. The power of Board, under Section 29A of the Act, to lease out its land, is relevant within the context of the duties of the Board relating to works, landing and shipping of goods, customs-wharves, erection of wharves, rates, and control of pilots, etc. Therefore, power of Board, under Section 29A of the Act, may not be seen as inclusive of the power to lease out land to housing societies. d. The Government of Sindh claims that the land in question is their property. The KPT Officers Cooperative Housing Society had filed a suit No. 735/2001 to get declaration that the title on land is of KPT and not Government of Sindh, which is pending before Sindh High Court. e. This transaction resulted in a significant loss to the State. If the land had been sold at market rate, the KPT would have earned approximately Rs 25.84 billion as sale proceeds of said land. As per Audits calculation it is noted that the rate charged by the KPT on leasing out the land for 99 years comes to Rs 0.54 billion which is 2.09% of approximate market value of the said land. f. In the absence of record, Audit could not ascertain the value of land, and propriety and probity of transactions under the lease agreements. In response to the observation, the management replied that KPT Officers Cooperative Housing Society is a separate legal entity and does not work under KPT management. The DAC was held on 26.01.2011. The DAC directed the KPT to produce all record to Audit for examination. However, no record was produced till finalization of this Report. Audit holds that under the provisions of the KPT Act, the management of KPT was not empowered to divest its land in this manner. Audit recommends that responsibility be fixed, disciplinary action be initiated against officials responsible for this lapse under relevant Efficiency and Discipline Rules as required under Section 14(3) of Auditor-General's (Functions, Powers and Terms and Conditions of Service) Ordinance, 2001 and record be provided to Audit for review without any further delay.

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20.4.2 Irregularity & non compliance 20.4.2.1 Non transparent award of contract amounting to Rs 1.3 billion for removal of concrete structure of collapsed berths According to Para 10 of GFR Vol-1, every officer incurring or authorizing expenditure from public funds should be guided by high standards of financial propriety and every public officer is expected to exercise the same vigilance in respect of expenditure incurred from public moneys as a person of ordinary prudence would exercise in respect of expenditure of his own money. During the audit of the Planning & Development Division, Karachi Port Trust (KPT), Karachi, Audit observed that KPT entered into an agreement with a local firm for the removal of concrete structure of collapsed berths No-10 & 14 at a consolidated cost of Rs 77.50 million after inviting gallop tender through press. The firm, under the agreement, submitted a bank guarantee of Rs 3,875,000, as performance security, with validity up to 27.09.08. Audit noted that, the KPT management forfeited bank guarantee as the contractor abandoned the work. To date the management made a payment of Rs 15.50 million equal to 20 % of the contract value. No record on abandonment of work was provided to Audit even upon repeated request which was in violation of cited rule. In the absence of record, the propriety and probity of expenditure could not be ascertained. The non-presentation of record may create doubts as to the actual existence of any such record at all. During the DAC meeting held on 26-01-2010, the management informed that gallop tender was invited in order to ascertain the real value of work after an international firm, already working with KPT, provided an estimated cost of Rs 400 million for the subject work. However, the contract was awarded to the local firm at a cost of Rs 77.50 million. When the local firm abandoned the work, fresh bids were invited and there upon, the international firm, who had previously quoted Rs 400 million, quoted Rs 800 million for the same work. However, later the contract was awarded at a cost of Rs1.30 billion. Audit mentioned in the DAC meeting that these facts had not been previously disclosed during the review of record. The DAC directed that an inquiry be undertaken to ascertain the circumstances under which the bid of Rs 400 million and Rs 800 million were rejected and work was awarded for Rs 1.3 billion. Audit recommends that the decision of the DAC be implemented.

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20.4.2.2 Irregular retention of Income Tax Rs 24.53 million According to Section 153 (1)(c) of the Income Tax Ordinance 2001, Every prescribed person making a payment in full or part including a payment by way of advance to a resident person or permanent establishment in Pakistan of a non-resident person on the execution of a contract, other than a contract for the sale of goods or the rendering of providing of services shall, at the time of making the payment, deduct tax from the gross amount payable at the rate of 6 percent as specified in the First Schedule. While reviewing the record relating to dredging & reclamation under the project Pakistan Deep Water Container Port (PDWCP) Kemari, Audit noted that an amount of Rs 24,532,983 was deducted by the management as 6% Income Tax from the contractor on 09-02-2010 and retained till this date for reasons not known. The amount of income tax retained by the KPT was a loss to exchequer. In response to the observation, the management replied that the firm was exempted from tax. The DAC meeting was held on 26.01.2011, which directed the management to verify the facts from FBR and intimate to audit. Audit recommends that the decision of DAC be implemented.

20.4.2.3 Irregular payment of Rs 952.61 millions for dredging & reclamation works without measurement Clause-56.1 of contract for the Dredging and Reclamation work signed between Karachi Port Trust (KPT) and M/s China International Water and Electric Corporation, provided post dredging survey to be done and proper measurement sheets duly verified by the Engineering staff be submitted with the bills. During review of record of project titled Pakistan Deep Water Container Port executed by the KPT, Audit noted that an amount of Rs 1.923 billion was paid as mobilization advance to a contractor for provision of a survey boat that would aid in conducting the measurement of dredging and reclamation. Due to non availability of survey boat the measurement of work could not be done. Therefore, the consultant of the project, advised the management to reduce the claim of the contractor by 10%. However, the advice was not considered.

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Audit further noted that the measurement sheets for the dredging and reclamation work were not attached with the second running bill amounting to Rs 952,606,889 for execution of work during July, 2009 submitted by the contractor. Audit holds that payment to contractor without measuring the actual work done up to the second running bill was in violation of the contract provision. Audit maintains that payment to contractor without due diligence and in disregard to the advice of the consultant resulted in diluting the effectiveness of public money. In response, the management replied that the measurement sheets have been duly checked by the resident engineer and found in order and satisfies the claim of contractor. The DAC meeting was held on 26.01.2011, which directed that the record be verified to the satisfaction of Audit. Audit recommends that the decision of the DAC be implemented.

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CHAPTER 21

21 MINISTRY OF RELIGIOUS AFFAIRS

21.1 Introduction of Ministry The Ministry of Religious Affairs is responsible for the pilgrimage beyond Pakistan, Muslims pilgrims visits to India for Ziarat and Saudi Arabia for Umra & Hajj. It is also responsible for the welfare and safety of pilgrims and Zairians. Ministry of Religious Affairs consists of one division, Religious Affairs Division. There are six subordinate offices working as Directorates of Hajj of this Ministry and two Autonomous bodies i.e. Council of Islamic Ideology and Pakistan Madrassah Education Board. The Ministry has been assigned following functions as per the Rules of Business, 1973: i. Pilgrimage beyond Pakistan; Muslim pilgrims visits to India ii. Ziarat and Umra iii. Welfare and safety of pilgrims and Zairian iv. Administrative control of the Hajj Directorate at Jeddah and dispensaries in Makkah and Medina v. Islamic studies and research including holding of seminars, conferences, etc., on related subjects vi. Training and education of Ulemas and Khatibs etc vii. Error-free and exact printing and publishing of the Holy Quran viii. Exchange of visits of scholars of Islamic learning and education, international conferences/seminars on Islamic subject and liaison with foreign and international bodies and institutions ix. Ruet-e-Hilal x. Tabligh xi. Observance of Islamic moral standards xii. Donations for religious purposes and propagation of Islamic Ideology abroad xiii. Marriage and divorce, infants and minor's adoption xiv. Auqaf

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21.2 Comments on Budget & Accounts (Variance Analysis)

Grant wise detail of current and development expenditure of Religious Affairs Division is mentioned below: (Figures in Rupees)
Grant Grant Type No 107 108 109 Current Current Current Total Original Grant 71,924,000 52,280,000 249,826,000 374,030,000 Supplementary Grant 3,836,000 56,150,000 59,986,000 Final Grant 75,760,000 52,280,000 305,976,000 434,016,000 Expenditure 74,476,143 48,159,294 298,191,818 420,827,255 %age Excess / (Saving) Excess/ (Saving) (1,283,857) (1.69) (4,120,706) (7.88) (7,784,182) (2.54) (13,188,745) (3.04)

Audit noted that there was an overall saving of only 3.04 percent amounting to Rs 13.188 million. Supplementary grants obtained without careful cash forecasting In order to ensure prudent financial management, Para 13(vii) of System of Financial Control and Budgeting, 2006 states that Ministries / Divisions should be able to anticipate budgetary requirements well ahead of the financial year to which the budget relates and obtain the concurrence of the Finance Division. The Finance Division is expected to decline any request for supplementary grants except in extraordinary circumstances. This document further states that the funds obtained from supplementary grants shall be expended for the purposes for which these have been sanctioned. In current expenditure, demands for supplementary grants shall not be made, except in extraordinary circumstances. During the year, supplementary grants of Rs 59.986 million were obtained which were 15.77% of original allocation According to Para 71 of General Financial Rules (Volume I), while framing budget estimates, the authorities should exercise utmost foresight. Variation between estimated and actual expenditure captures the level of foresight that goes into budget formulation. As shown in the graph below, the excess in current expenditure was 12.51%, which, after accounting for supplementary grants changed to savings of 3.04%.

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21.3 Brief comments on the status of compliance with PAC Directives

Years Total No Of Paras Compliance Non-Complied % of compliance 0 0 0 1987-88 2 2 0 100% 1988-89 0 0 0 1989-90 0 0 0 1990-91 7 4 3 57% 1991-92 3 1 2 33% 1992-93 0 0 0 1993-94 1 1 0 100% 1995-96 4 2 2 50% 1996-97 0 0 0 1999-00 27 24 3 89% 2000-01 0 0 0 2001-02 0 0 0 2006-07 0 0 0 2008-09 Note: The report for the audit years 1998-99, 2002 2006, 2007-08 have not been discussed in the Public Accounts Committee (PAC)

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21.4 AUDIT PARAS 21.4.1 Irregularity & non compliance 21.4.1.1 Non refund of unspent balance on account of daily allowances of the seasonal duty staff - Rs 3.15 million

As per Sr. 21 (ii) under Annex-1 of System of Financial Control and Budgeting 2006, where T.A advance was drawn, the adjustment bill should be submitted within one year of the date of performance of journey by the government servant, failing which the advance will be recovered. During the review of record of the Ministry of Religious Affairs, Islamabad for the years 2006-09, Audit observed that the management had collected an amount of Rs 23,913,400 from various Ministries/Divisions. This amount was received on account of daily allowances (DAs) in respect of staff deputed for the Hajj duty in the years 2006, 2007 and 2008. Audit noted that the adjustment statement rendered by the Directorate General of Hajj, Jeddah, had shown a payment of Rs 23,913,400 on account of subject DAs. However, upon detailed scrutiny of record, Audit observed that a sum of Rs 3,150,193, which was the unspent balance of the Daily Allowance, had been deposited by the Ministry in Pilgrims Welfare Fund (PWF). Audit holds that unspent balance of DA was not a legal receipt of PWF. Audit maintains that the Ministry of Religious Affairs, by not refunding such unspent balances, is (a) increasing the PWF and (b) investing in commercial banks, while the government is cash-starved and borrowing from the commercial banks at higher rates. The DAC meeting was held on 21-01-2011, which directed that the unspent balance amount be refunded to the respective Ministries/Division or deposited in the Federal Consolidated Fund. Audit recommends that the decision of the DAC may be implemented under intimation to Audit.

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21.4.1.2 Overpayment on account of daily allowances for the medical mission and Khudam-ul-Hujjaj - Rs 7.81 million Para 10 (2) of GFR stipulates that the expenditure should not be prima facie more than the occasion demands In terms of SR 29, Daily Allowance, where stay for a night or more is involved, will be admissible only for the night spent at out stations. During the review of the record of the Ministry of Religious Affairs, Islamabad, for the years 2006-09, Audit found following irregularities in the adjustment statement of Daily Allowances, in respect of the Medical Mission and Khudam-ul-Hujjaj, submitted by the Director General Hajj, Jeddah, and accepted by the Ministry of Religious Affairs: I. In the Hajj 2006, the Khudam-ul-Hujjaj were paid DA for a total of 812 days instead of scheduled duty of 615 days, which resulted in an over payment of Rs 7.129 million. In the years 2006-09, Khudam-ul-Hujjaj were also paid Daily Allowance for the arrival day at their respective headquarters in Pakistan, which resulted in an overpayment of Rs 0.679 million.

II.

Audit noted the above payments were in violation of Para 10 (2) and (v) of GFR Vol.1 The overpayment of Rs 7.808 million has put an extra burden on the exchequer. The DAC meeting was held on 21-01-2011, which directed that the overpayments be recovered and deposited in the Federal Consolidated Fund. Audit recommends that the decision of the DAC may be implemented under intimation to Audit.

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CHAPTER 22

22 MINISTRY OF SCIENCE & TECHNOLOGY 22.1 Introduction of Ministry Ministry of Science and Technology (MoST) is the national focal Ministry of the Government of Pakistan for planning, coordination and directing efforts to initiate and launch scientific and technological programs and projects aimed at economic development of the country. The Ministry is working on the national agenda to have a sound and sustainable technological base which would lead to the socio-economic development of the country and to achieve the vision for a better Pakistan. The principal agenda of the MoST is building Pakistans technological competence in the 21st century forging into new markets, develop a larger pool of human resource for reverse brain drain, and integrate the soft technology infrastructure into hard modern technological base ,strengthen technology institutions, effective S&T governance and enhance the capacity of indigenous innovation systems The Ministry also has a Scientific & Technological Research (STR) Division which is responsible for the preparation and implementation of all science and technological research policies and plans. Its objectives and functions are as follows:

Preparation of and implementation of policies and plans To promote the science and technology for achieving rapid economic development To enhance self reliance through the science and technology inputs To develop and maintain an adequate national science and technology system To improve the living standard of masses and ensuring the national security through science and technology applications

Charter of functions/duties assigned to STR Division under Rules of Business: 1. 2. 3. 4. Establishment of science cities Establishment of institutes and laboratories for research and development in the scientific and technological fields Establishment of science universities as specifically assigned by the Federal Government Planning, coordination, promotion and development of science and technology monitoring and evaluation of research and development works, including

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5. 6. 7.

scrutiny of development projects and coordination of development programs in this field Promotion of applied research and utilization of results of research in the scientific and technological fields carried out at home and abroad Initiate promotional measures for establishment of venture capital companies for technological development and growth Promotion of technology, standards, testing and quality assurance system

The Ministry also has the following five wings which have their own responsibilities towards the Division so as to achieve its objectives. 1. 2. 3. 4. 5. Technology Wing Policy & Coordination Wing Planning & Development Wing International Liaison Wing Electronic Wing

22.2 Comments on Budget & Accounts (Variance Analysis)

Grant wise detail of current and development expenditure of Science and Technology Division is mentioned below: (Figures in Rupees)
Grant Grant Type No 110 111 168 Current Current Subtotal Development Subtotal Total Original Grant 298,838,000 2,777,232,000 3,076,070,000 3,140,377,000 3,140,377,000 6,216,447,000 Supplementary Grant 4,681,000 29,000,000 33,681,000 45,000 45,000 33,726,000 Final Grant 303,519,000 2,806,232,000 3,109,751,000 3,140,422,000 3,140,422,000 6,250,173,000 Expenditure 248,341,077 2,773,569,203 3,021,910,280 1,371,281,289 1,371,281,289 4,393,191,569 %age Excess / (Saving) Excess/ (Saving) (55,177,923) (18.18) (32,662,797) (1.16) (87,840,720) (2.82) (1,769,140,711) (56.33) (1,769,140,711) (56.33) (1,856,981,431) (29.71)

Audit noted that there was an overall saving of 29.71 percent amounting to Rs 1,856.98 million which was due to saving in development expenditure of Rs 1,769.14 million and saving in current expenditure of Rs 87.84 million.

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Supplementary grants obtained without careful cash forecasting In order to ensure prudent financial management, Para 13(vii) of System of Financial Control and Budgeting, 2006 states that Ministries / Divisions should be able to anticipate budgetary requirements well ahead of the financial year to which the budget relates and obtain the concurrence of the Finance Division. The Finance Division is expected to decline any request for supplementary grants except in extraordinary circumstances. This document further states that the funds obtained from supplementary grants shall be expended for the purposes for which these have been sanctioned. In current expenditure, demands for supplementary grants shall not be made, except in extraordinary circumstances. During the year, supplementary grants of Rs 33.726 million were obtained which were 0.53% of original allocation. According to Para 71 of General Financial Rules (Volume I), while framing budget estimates, the authorities should exercise utmost foresight. Variation between estimated and actual expenditure captures the level of foresight that goes into budget formulation. As shown in the graph below, the saving in current expenditure was 1.76%, which, after accounting for supplementary grants changed to savings of 2.82%. In development expenditure, savings against original budget was 56.33% which remained at 56.33% when supplementary grants were taken into account.

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22.3 Brief comments on the status of compliance with PAC Directives

Years Total No Of Paras Compliance Non-Complied % of compliance 0 0 0 1987-88 3 0 3 0% 1988-89 1 0 1 0% 1989-90 4 4 0 100% 1990-91 12 9 3 75% 1991-92 8 7 1 88% 1992-93 0 0 0 1993-94 6 1 5 17% 1994-95 2 0 2 0% 1995-96 1 0 1 0% 1996-97 0 0 0 1997-98 158 0 158 0% 1999-00 7 0 7 0% 2000-01 0 0 0 2001-02 0 0 0 2006-07 5 0 5 0% 2008-09 Note: The report for the audit years 1998-99, 2002 2006, 2007-08 have not been discussed in the Public Accounts Committee (PAC)

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22.4 AUDIT PARAS 22.4.1 Irregularity & non compliance 22.4.1.1 Overpayment on account of rent of office building- Rs 7.34 million In term of Section 5(n) of the agreement made between Ministry of Science & Technology and Evacuee Trust Property Board (ETPB), in the event of building /demised premises being destroyed by fire, earthquake or by any other act of God or political disturbance etc. the Board shall reinstate at its expenses expeditiously. In such event the whole or part of advance rent according to the circumstances shall, from the date of damage or destruction, till such time the premises are restored to former condition, shall be refunded by the Board to the Tenant or adjusted as mutually agreed between the parties. Audit noted that Ministry of Science & Technology had paid Rs 22,641,019 as rent of office space & common area measuring 38188 sq.ft. and 2374 sq.ft. respectively for the period 1-7-2008 to 21-12-2008 and 20-09-2009 to 30-06-2010 to ETPB, Lahore, vide cheque No. 2160724 dated 28-06-2009. After a bomb blast at a nearby hotel in Islamabad, on 20-09-2008, the Ministry was temporarily shifted to other premises from where it returned to ETPB building on 10-04-2009. The rent for the period during which the building was in possession of Ministry, was paid to ETPB, although, the Ministry was not responsible for the payment of rent for the period from 21-12-2008 to 10-04-2009 to ETPB in accordance with the Section 5(n) of the agreement. This resulted in an overpayment of Rs 7,342,212 to ETPB for the period from 21-12-2008 to 10-04-2009. Audit maintains that the overpayment was a wasteful expenditure which has put an extra burden on the exchequer. In response to the observation, the management stated that a letter has been issued to Chairman, Evacuee Trust Property Board (ETPB) with the request that Rs 7,342,212 overpaid for the period from 21.12.2008 to 10.04.2009 may be refunded or adjusted from the rent of the financial year 2010-2011. Compliance will be shown to the Audit as and when decision is received from the ETPB. The DAC meeting was held on 23-12-2010, in which the Principal Accounting Officer (PAO) directed for holding an inquiry for the overpayments and non recovery. Audit recommends that the decision of the DAC be implemented.

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22.4.1.2 Non adjustment on account of releases made to missions abroad - Rs 600.54 million (US$ 49.074 million + 0.472 million). As per para 17 of GFR -Vol-I, it is the duty of every departmental and controlling officer to see that the Accountant General is afforded all reasonable facilities in the discharge of his functions and furnished with the fullest possible information for which he may ask, for the preparation of any account or report, which it is his duty to prepare. No such information nor any books or other documents to which the Auditor-General has statutory right of access may be withheld from the Accountant General. The PC-I of Teachers Researchers Overseas Scholarship Scheme (TROSS) amounting to Rs 826.7 million was approved by the ECNEC on 09-10-1999. The scheme focused on the training of 100 outstanding teachers and researchers. Each selected scholar was required to take admission in a PhD program in one of the disciplines at top ten universities of the world. An amount of Rs 600.537 million (US$ 49.074 million + 0.472 million) was released/ remitted in advance up to 30-06-2010 under the scheme by the Ministry of Science & Technology to Pakistans missions abroad for the payment of scholarships, tuition fee and book allowance. Audit noted that neither reconciliation was made in respect of amount released nor adjustment accounts in respect of expenditure on scholars, who completed their studies was rendered by the respective missions to the Ministry. Audit maintains that there is a possibility of unspent balances with the respective missions which were required to be surrendered to the exchequer. In its response to the observation, the Ministry replied that The Missions/Embassies have been providing detailed expenditure statements and balances to the Ministry, on the basis of which further funds were provided to Missions in the subsequent years. The Expenditure Statements, provided by Missions/Embassies are mostly available with the AO (Training) section and can be seen by the Audit. However, there have been some interruptions also in the provision/receipt of these statements from Mission/Embassies, whereas some of the record of the period 2001-2002 was lost in fire at Shaheed-e-Millat Secretariat and subsequently there were some interruptions also in 2008, after the relocation of Ministry from its present premises.. A DAC meeting was held on 23-12-2010, which directed that adjustment account of each scholar along with reconciliation of advance payments may be provided to Audit within 2 weeks. However, no record was presented to Audit till finalization of this Report.

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Audit recommends that the adjustment accounts along with supporting record be provided and amount be recovered under intimation to Audit. 22.4.1.3 Non recovery of 109,541.40 and $77,564.22 on account of incomplete scholarship under the Teachers and Researchers Overseas Scholarship Scheme (TROSS) As per para 17 of GFR -Vol-I, it is the duty of every departmental and controlling officer to see that the Accountant General is afforded all reasonable facilities in the discharge of his functions and furnished with the fullest possible information for which he may ask, for the preparation of any account or report, which it is his duty to prepare. No such information nor any books or other documents to which the Auditor-General has statutory right of access may be withheld from the Accountant General. The PC-I of Teachers Researchers Overseas Scholarship Scheme (TROSS) amounting to Rs 826.7 million was approved by the ECNEC on 09-10-1999. The scheme focused on the training of 100 outstanding teachers and researchers. Each selected scholar was required to take admission in a PhD program in one of the discipline at top ten universities of the world. Under TROSS, each scholar was also required to serve the Government of Pakistan for at least five years after the completion of training abroad and if the scholar failed to qualify the course for which awarded TROSS scholarship, Government would recover the entire expenditure inclusive of travel cost from the scholar/ guarantor. Audit noted, during the audit of Ministry of Science & Technology, that five scholars, who were funded from the subject scheme, failed in their studies to complete their studies after availing the scholarship for one or more years. The detail expenditure incurred on the scholars is mentioned below:
S.No Name of Scholar Tuition fee paid Maintenance allowance paid Book/ Thesis allowance paid 342.46 NA 854.84 Total $258.06 $1048.39 Total Total Amount paid in foreign currency 33,920.22 33,606.97 42,014.21 109,541.40 $31,499.45 $46,064.77 $77,564.22

1 2 3

Mr. Mukhtarullah Mr Khizar Hayat Mr. Umair Bilal Cheema

19700 13788.77 17481.95

13877.76 19818.2 23677.42

4 5

Mr. Atique Ahmed Mr. Ahsan Vaqar Hundel

$1956.49 $6016.38

$19284.9 $19000

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Audit maintains that the failure of scholars to complete their education resulted in a wasteful expenditure of UK Pound 109,541.40 & USD 77,564.22. A DAC meeting was held on 23-12-2010, where the Principal Accounting Officer (PAO) directed that cases should be filed against defaulters within 15 days. Audit recommends that the action against the defaulters under the E&D Rules 1973 be taken under intimation to Audit. 22.4.1.4 Unauthorized purchase of 10 marla plot without any provision in the approved PC-I Rs 2.02 million According to Para 10 of GFR Vol-1, every officer incurring or authorizing expenditure from public funds should be guided by high standards of financial propriety and every public officer is expected to exercise the same vigilance in respect of expenditure incurred from public moneys as a person of ordinary prudence would exercise in respect of expenditure of his own money During the review of record of Pakistan Council for Research in Water Resources (PCRWR), Audit noted that the PSDP Project Provision of Safe Drinking Water under Sr.No.1 of Annexure 1-B, titled Strengthening of PCRWR Water Quality Laboratories provided for Safe Drinking Water. Under the Project, six already existing laboratories were proposed to be constructed/renovated/air-conditioned at a cost of Rs15.60 million. One of these laboratories existed at Regional Office of PCRWR at Bahawalpur. Audit observed that contrary to the provisions of the PC-I, authorities of the regional office PCRWR, Bahawalpur, under the administrative control of Ministry of Science and Technology, purchased a 10 marla plot at a cost of Rs 2.028 million without the provision in PC-I. Thus, the expenditure was irregular and unauthorized. Audit maintains that the payment has put an extra burden on the exchequer. In its response, the management stated that the plot had been purchased from the funds borrowed from another project namely Provision of Safe Drinking Water (PSDW) and the funds would be refunded to the PSDW from income generated by PCRWR from the fees of water analysis received from public. A DAC meeting was held on 23-12-2010, which directed the management to initiate an inquiry regarding purchase of land by the regional office without delegation of power and provision in the PC-I.

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Audit recommends that the action be taken against the officials responsible for the lapse. Further, the detail account of income, from the fee of water analysis received from public, be provided to Audit. 22.4.1.5 Irregular expenditure by unauthorized retention of closed project vehicles - Rs 1.16 million As per rule 3(4) of Rules for the Use of Staff Cars, 1980 The Cabinet Division will arrange for the upkeep and maintenance of a staff cars which becomes surplus to the requirements of Minister, Minister of State, Advisors or any other dignitary or office holder or on completion of project. During the review of record of Pakistan Council for Renewable Technologies (PCRET) for the financial year 2008-09, Audit observed that four development projects had been completed during April 2009. But the management had retained 5 vehicles of closed projects without authorization. The continued misuse of vehicles resulted in to an expenditure of Rs 1,157,415 on repair & maintenance and POL. The detail is given below:
Sr. No 1 Name of Project Pilot Project on Rural Electrification using Solar Energy Pilot Production of Silicon Solar Cells and Modules Community Solar Dryer for drawing Dates Electrification of Remote Hill Areas of NWFP FATA and Northern Areas through Installation of 70 MHP Plants -DoVehicle No GD-781 Place of Duty PCRET Regional Office Karachi PCRET Head Office Islamabad -DoPCRET Regional Office Peshawar -DoTotal POL (Rs) 233,705 Repair (Rs) 33,883

GE-778

161,106

56,944

3 4

GD-782 GE-675

395,029 72,879

59,434 23,722

GE-676

96,271 958,990

24,442 198,425

Audit maintains that retention and misuse of vehicles belonging to closed projects without the approval of the Cabinet Division has put an extra burden on the exchequer. A DAC meeting was held on 23-12-2010, where the Principal Accounting Officer (PAO) directed an inquiry for retention and misuse of vehicles.

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Audit recommends that the action against the officials responsible for the lapse may be taken under intimation to Audit. Further, the details of income from the fees of water analysis received from public be provided to Audit.

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CHAPTER 23

23 MINISTRY OF SPORTS 23.1 Introduction of Ministry The Ministry of Sports was established as an independent Ministry in April, 2006 as a result of bifurcation of the Ministry of Culture and Sports vide Cabinet Divisions order No.4-7/2006-Min-I dated 27thApril, 2006. The Ministry has the primary responsibility of promotion and development of sports in the country comparable to standards prevailing internationally. Main activities in this respect are to organize sporting events at national level and arranging participation of Pakistani sports persons in international competitions/tournaments and exchange of sports persons with foreign countries. The Ministry is responsible for the administrative control of the Pakistan Sports Board, Pakistan Cricket Board and Pakistan Sports Trust. The business assigned to the Ministry as per the Rules of Business includes: Sports organizations and grant-in-aid to them Pride of Performance Awards in the field of sports National Sports Trust International exchange of sports teams

23.2 Comments on Budget & Accounts (Variance Analysis) Grant wise detail of current and development expenditure is mentioned below: (Figures in Rupees)
Grant No 115 170 Grant Type Current Development Total Original Grant 370,980,000 583,161,000 954,141,000 Supplementary Grant 190,201,000 66,308,000 256,509,000 Final Grant 561,181,000 649,469,000 1,210,650,000 Expenditure %age Excess / (Saving) Excess/ (Saving) 561,351,864 170,864 0.03 252,768,282 (396,700,718) (61.08) 814,120,146 (396,529,854) (32.75)

Audit noted that there was an overall saving of Rs 396 million which mainly occurred in development grant.

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Supplementary grants obtained without careful cash forecasting In order to ensure prudent financial management, Para 13(vii) of System of Financial Control and Budgeting, 2006 states that Ministries / Divisions should be able to anticipate budgetary requirements well ahead of the financial year to which the budget relates and obtain the concurrence of the Finance Division. The Finance Division is expected to decline any request for supplementary grants except in extraordinary circumstances. This document further states that the funds obtained from supplementary grants shall be expended for the purposes for which these have been sanctioned. In current expenditure, demands for supplementary grants shall not be made, except in extraordinary circumstances. During the year, supplementary grants of Rs 256 million were obtained which were 24% of original allocation. According to Para 71 of General Financial Rules (Volume I), while framing budget estimates, the authorities should exercise utmost foresight. Variation between estimated and actual expenditure captures the level of foresight that goes into budget formulation. As shown in the graph below, the excess in current expenditure was 51.32%, which, after accounting for supplementary grants decreased to 0.03%. In development expenditure, savings against original budget was 56.66% which changed to 61.08% when supplementary grants were taken into account.

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23.3 Brief comments on the status of compliance with PAC Directives

Years Total No Of Paras Compliance Non-Complied % of compliance 0 0 0 1987-88 6 0 6 0% 1988-89 0 0 0 1989-90 1 1 0 100% 1990-91 0 0 0 1991-92 9 6 3 67% 1992-93 0 0 0 1993-94 1 1 0 100% 1994-95 0 0 0 1995-96 0 0 0 1996-97 15 6 9 40% 1997-98 0 0 0 1999-00 0 0 0 2000-01 5 4 1 80% 2001-02 1 0 1 0% 2006-07 28 PCB 0 28 0% 2006-07 3 0 3 0% 2008-09 Note: The report for the audit years 1998-99, 2002 2006, 2007-08 have not been discussed in the Public Accounts Committee (PAC)

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23.4 AUDIT PARAS 23.4.1 Performance 23.4.1.1 Absence of vigilance in construction of sports stadium- Rs 10.86 million According to Para 10 of GFR Vol-1, every officer incurring or authorizing expenditure from public funds should be guided by high standards of financial propriety and every public officer is expected to exercise the same vigilance in respect of expenditure incurred from public moneys as a person of ordinary prudence would exercise in respect of expenditure of his own money. During the audit of accounts of Ministry of Sports, it was noted that DDWP approved a project on 07-02-2006 for the Construction of Sports Stadium at Chunian, District Kasur at a cost of Rs 12.260 million with the completion period of one year. The project was executed by Pak PWD. Audit observed the following irregularities in the execution of the project: i) The management released Rs 10.86 million (88.58%) funds out of approved PC-I cost but no efforts were made to ascertain the progress of work and status of funds utilization. The record produced to audit revealed that, presently, the work was not in progress and only boundary wall and stairs/steps were constructed by Pak PWD. ii) The funds were released to Pak PWD subject to following conditions, which were not fulfilled by Pak PWD: a. Submission of monthly progress reports; b. Submission of funds utilization report/statement of expenditure on quarterly basis; c. Submission of audited statement of accounts; d. Monitoring of the project will be carried out by a committee appointed for the purpose. Audit holds that the management did not exercise vigilance in the execution of the project and did not maintain/secure the relevant record, which constituted violation of cited rules. Audit maintains that the funds invested in to the project are vulnerable to misuse in the absence of vigilance and oversight. No reply was furnished by the Board management till issuance of this Report.

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The DAC meeting was not convened by the PAO till the time of finalization of this audit report. Audit recommends that the case be investigated and report be presented to Audit.

23.4.2 Irregularity & non compliance 23.4.2.1 Illegal handing over of 45 acres land and sports shooting facilities to the Gun Club, Islamabad Clause-X of Article4 of the Constitution of the Pakistan Sports Board (PSB) empowers the Board to manage, improve or supervise, any property, movable or immovable, with all necessary powers, in the interest of the Board. During scrutiny of record of the Pakistan Sports Board (PSB) Audit observed that facilities were set up for sports shooting events in the 9th SAF Games in the Islamabad Sports Complex area. Later on, Ministry of Minorities, Culture, Sports, Tourism and Youth Affairs vide resolution No. F-4/1/2002-S-II dated 30th September 2002 established the Gun Club, Islamabad. Audit noted that the resolution establishing the Gun Club had not been passed in exercise of any delegated statutory power. Thus, the Gun Club is neither a corporate body nor a statutory person. Hence, the Gun Club has no legal standing. The draft resolution of the Gun Club, Islamabad was referred to the Law Division by the Ministry of Sports, which opined that: Resolution is a mere piece of correspondence and not a statutory instrument. It may be added that the Resolution is a form of conveying government decision for making a public announcement in the gazette on important matters of policy, appointment of Committees or Commission of Enquiries and of the result of the review of important reports of such bodies. Audit has also observed the following irregularities in this case: i) The land of the PSB was provided to the management of Gun Club without competitive bidding process. ii) The assets of PSB were leased out without observing codal formalities

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iii) The administrative relation of the Gun Club with the Ministry of Sports was not documented. For all practical purposes, the management of the Club is in the hand of private individuals, who are earning money by utilizing government land and assets but paying nothing to the exchequer. iv) No formal agreement was available on record regarding maintenance/handing over of 45 Acres land and using of sports shooting facilities between the Pakistan Sports Board and the Gun Club Islamabad. v) Detail of assets transferred to the Gun Club, Islamabad was not available on record. vi) Consideration i.e. return in lieu of land and facilities handed over to the club was not available on record. This implies that all assets / facilities were handed over to the Gun Club free of cost. vii) The land was neither leased/sub-leased by PSB nor allotted/transferred by CDA. viii) The Gun Club, Islamabad was not regulated under a government charter. ix) The Gun Club, Islamabad was providing facilities to the elite and no benefit was being derived by the general public. In view of the above mentioned irregularities, Audit maintains that transfer/handing over of 45 acre land and sports shooting facilities (assets of PSB) to the Gun Club is illegal and unauthorized. Audit holds that the non-transparent lease of government land and assets, to an entity whose legal status is undefined, has deprived the exchequer of its lawful income. No reply was furnished by the management till finalization of this Report. The DAC meeting was not convened by the PAO till the time of finalization of this audit report. Audit recommends that an inquiry be held to investigate the matter, responsibility be fixed, and disciplinary action be initiated against the officials responsible for this lapse.

23.4.2.2 Unauthorized establishment of shadi lawn at PSB coaching centre, Karachi Non-recovery of rent amounting to Rs 28.490 Million Article- 4 (x) of the Constitution of Pakistan Sports Board (PSB) empowers the Board to manage, improve or otherwise supervise, any property, movable or immovable, with all necessary powers, in the interest of the Board. Furthermore, no such power is vested with Executive Committee of the PSB to exercise the power of the Governing Body of the Board.

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During review of record of Pakistan Sports Board (PSB), Audit observed that the Executive Committee of the PSB in its 63rd and 64th meeting decided to establish shadi lawn and car parking at PSB Coaching Centre, Karachi. A catering firm was awarded the contract on 29-10-2005 and land measuring 177,095 sq.ft. was leased out to the firm for a period of 30 years at a monthly rent of Rs 605,000. Audit noted that the Executive Committee of PSB was not empowered to lease out the PSB property for the establishment of shadi lawn. Audit also noted that rent of Rs 28,490,054 from 29-10-2005 till date had not been recovered from the contractor. The management neither recovered the amount of rent nor cancelled the lease deed thereby favouring the contractor. Audit maintains that the irregularities described in the observation might have caused leakage in public funds. No reply was received till finalization of this audit Report. The DAC meeting was not convened by the PAO till the time of finalization of this audit Report. Audit recommends that responsibility be fixed, disciplinary action be initiated against officials responsible for this lapse, the lease agreement be terminated and amount of rent be recovered from the contractor.

23.4.2.3 Irregular expenditure on account of repair / renovation of office block Rs 9.71 million Rule-12 of the Public Procurement Rules 2004 states that all procurement estimated to cost over Rs 2 million shall be advertised on the Public Procurement Regulatory Authority (PPRA) website as well as in newspapers having wide circulation for the purpose of competitive rates. In terms of rule-6 (vii) of Financial Rules of the Pakistan Sports Board, every officer shall exercise the same vigilance in respect of expenditure incurred from the Boards funds as a person of ordinary prudence would exercise in respect of expenditure to his own money.

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Audit noted that Pakistan Sports Board incurred an expenditure of Rs 9,709,072 on account of repair/ renovation of office Block for Ministry of Sports, Swimming Pool Area and Pakistan Sports Complex, Islamabad. The contract was awarded to firm on 25th July, 2008 at a cost of Rs 4.20 million. Later the scope of work was enhanced to Rs 9.7 million. Audit noted that the work was awarded to the firm without open competition in violation of above cited rule. Therefore, the incurrence of related expenditure on this contract is in violation of Public Procurement Rules. By violating Public Procurement Rules 2004, the government was denied the benefit of competitive rates. No reply was received till finalization of this audit report. The DAC meeting was not convened by the PAO till the time of finalization of this audit report. Audit recommends that an inquiry be held to investigate the matter, responsibility be fixed, and disciplinary action be initiated against the officials responsible for this lapse. Further, competitive bidding be ensured in all contracts 23.4.2.4 Mis-procurement of Rs 4.59 million Rule-12 of the Public Procurement Rules 2004 states that all procurement estimated to cost over Rs 2 million shall be advertised on the Public Procurement Regulatory Authority (PPRA) website as well as in newspapers having wide circulation for the purpose of competitive rates. In terms of rule6(vii) of Financial Rules of the Pakistan Sports Board, every officer shall exercise the same vigilance in respect of expenditure incurred from the Boards funds as a person of ordinary prudence would exercise in respect of expenditure of his own money. Audit noted that Pakistan Sports Board, Islamabad awarded a work to a firm on 25 th July 2008 amounting to Rs 3,892,000 for repair/renovation of Director General Office, DDG (Tech) Office and 02 Rooms & Kitchen of Allama Iqbal Hostel, PSB. Audit maintains that procurement of goods and services were made without open competition as required under rules.

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Audit holds that the government was denied the benefit of competitive rates by violating Public Procurement Rules 2004. No reply was received till finalization of this audit report. The DAC meeting was not convened by the PAO till the time of finalization of this audit report. Audit recommends that an inquiry be held to investigate the matter, responsibility be fixed, and disciplinary action be initiated against the officials responsible for this lapse. Further, competitive bidding be ensured in all contracts. 23.4.2.5 Unjustified expenditure on account of repair / renovation of Ministers office - Rs 4.17 Million Rule-12 of the Public Procurement Rules 2004 states that all procurement estimated to cost over Rs 2 million shall be advertised on the Public Procurement Regulatory Authority (PPRA) website as well as in newspapers having wide circulation for the purpose of competitive rates. In terms of rule-6 (vii) of Financial Rules of the Pakistan Sports Board, every officer shall exercise the same vigilance in respect of expenditure incurred from the Boards funds as a person of ordinary prudence would exercise in respect of expenditure to his own money. Audit noted that Pakistan Sports Board, Islamabad awarded work to a firm on 27 th November 2008 amounting to Rs 3,559,550 for repair/renovation of Ministers Office. The cost of work was later on revised to Rs 4,174,088 and the same was paid to the firm. Audit raised the following observations: The expenditure incurred on repair/renovation of Ministers Office was not the responsibility of the Pakistan Sports Board. ii) The record provided to audit revealed that procurement of goods and services were made without open competition. iii) The total expenditure of Rs 4,174,088 also included an expenditure of Rs 1 million incurred on purchase of office furniture without assigning any reason for replacement with old one. i)

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Audit maintains that the expenditure amounting to Rs 4,174,088 incurred on repair/ renovation of Ministers Office was not the responsibility of the Pakistan Sports Board and held irregular. By violating Public Procurement Rules 2004, the government was denied the benefit of competitive rates. No reply was received till finalization of this audit report. The DAC meeting was not convened by the PAO till the time of finalization of this audit report. Audit recommends that an inquiry be held to investigate the matter, responsibility be fixed, and disciplinary action be initiated against the officials responsible for this lapse. Further, competitive bidding be ensured in all contracts. 23.4.2.6 Unauthorized expenditure on mobile phone facility - Rs 567,890 In terms Cabinet Division O.M.No. 2/6/2002-GC-(Part-II) dated 20th January 2003, a Minister is entitled to maintain mobile phone at government expense not exceeding Rs 7,000 per month and equipment (mobile phone set) cost should not exceed Rs 5,500. Furthermore, Ministries / Divisions concerned will settle the bill dues with the company out of the budget allocation of the Ministry/Division. Cabinet Division vide O.M. No. 2/26/2005-RA-IV dated 11th May 2009 decided to extend the use of mobile phone facility at public expense to all officers in BS-20 and below working in Ministries / Divisions on regular basis. Office telephone ceiling issued vide Cabinet Division O.M.No. 3/10/2006/STC-RA-III dated 5th January 2007 was partially revised adjusting mobile phone ceiling within the office phone ceiling. Facility allowed to officers in BS-20 and below (posted in the Ministries / Divisions only) was also subject to the condition that the officers will arrange equipment (mobile phone set) at their own. Para-4 of the telephone policy issued by Cabinet Division vide O.M. No. 3/10/2006/STCRA-III dated 5th January 2007 states that all Autonomous Bodies/ Semi-Autonomous Bodies/ Corporations will strictly follow the policy as all such bodies were established with the public revenues and later on granted financial autonomy under the Act/Ordinance.

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During the review of record of Ministry of Sports, Audit noticed that the Minister for Sports, the Director General (PSB) and officers of PSB were enjoying mobile phone facility without authorization at public expense, as the Minister was entitled to avail the facility from Ministry of Sports and the Director General (PSB) / officers of PSB were not entitled to avail the facility in the light of revision of policy on use of mobile phone facility to be read/ interpreted with telephone policy issued by the Cabinet Division. The detail of expenditure incurred during 2008-09 and 2009-10 is as under:
Sr. No 1 2 3 4 User of Mobile Phone Facility Minister for Sports Director General (PSB) Officers (PSB) Secretary, Sports Total Mobile Sets (Rs) 41,500 19,400 Mobile Phone Charges (Rs) 285,636 168,150 47,204 6,000 Total (Rs) 327,136 187,550 47,204 6,000 567,890

Audit maintains that the unauthorized expenditure on mobile phones caused an extra burden on the exchequer. No reply was furnished by the Board management till issuance of the report. The DAC meeting was not convened by the PAO till the time of finalization of this audit report. Audit recommends that expenditure of Rs 567,890 incurred on mobile phone facility without authorization needs to be recovered from the persons concerned.

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CHAPTER 24

24 MINISTRY OF TEXTILE INDUSTRY 24.1 Introduction of Ministry The need to establish a separate Ministry for textiles had been on the cards for several years as this sector contributes 8.50% of the national income, constitutes more than 60 % of the export earning of the country, employs 38% of the industrial labor force, generates half of the production of manufacturing sector and shares 9% in GDP besides having the potential to meet the challenges of the highly competitive global market especially after the removal of trade barriers under W.T.O regime. The functions allocated to Ministry of Textile Industry in terms of rule 3(3) of Rules of Business 1973, are: 1. Formulation of textile policy 2. Coordination and liaison with federal agencies/institutions, provincial governments and local governments entities for facilitation and promotion of the textile sector 3. Liaison, dialogues, negotiations, except trade negotiations, and cooperation with international donor agencies and multilateral regulatory and development organizations with regard to textile sector 4. Setting of standards and monitoring and maintaining vigilance for strict compliance of the standards throughout production and value chain 5. Textile related statistics, surveys, commercial intelligence, analysis and dissemination of information and reports on international demand patterns, market access etc 6. Linkages with cotton and textile producing countries 7. Training, skill development, research for quality improvement and productivity enhancement throughout the production/value chain 8. Management of textile quotas

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24.2 Comments on Budget & Accounts (Variance Analysis) Grant wise detail of current and development expenditure is mentioned below: (Figures in Rupees) %age Grant Supplementary Grant Type Original Grant Final Grant Expenditure Excess / (Saving) Excess/ No Grant (Saving) 121 Current 110,579,000 39,223,000 149,802,000 141,799,456 (8,002,544) (5.34) 172 Development 484,746,000 2,000 484,748,000 270,612,790 (214,135,210) (44.17) Total 595,325,000 39,225,000 634,550,000 412,412,246 (222,137,754) (35.01) Audit noted that there was an overall saving of 35 percent amounting to Rs 222.137 million which was mainly due to saving of Rs 214.135 million in development grant. This depicted that funds were demanded in excess while preparing initial budget. Supplementary grants obtained without careful cash forecasting In order to ensure prudent financial management, Para 13(vii) of System of Financial Control and Budgeting, 2006 states that Ministries / Divisions should be able to anticipate budgetary requirements well ahead of the financial year to which the budget relates and obtain the concurrence of the Finance Division. The Finance Division is expected to decline any request for supplementary grants except in extraordinary circumstances. This document further states that the funds obtained from supplementary grants shall be expended for the purposes for which these have been sanctioned. In current expenditure, demands for supplementary grants shall not be made, except in extraordinary circumstances. During the year, supplementary grants of Rs 39.225 million were obtained which were 6.5% of original allocation. According to Para 71 of General Financial Rules (Volume I), while framing budget estimates, the authorities should exercise utmost foresight. Variation between estimated and actual expenditure captures the level of foresight that goes into budget formulation. As shown in the graph below, the excess in current expenditure was 28.23%, which, after accounting for supplementary grants changed to savings of 5.34%. In development expenditure, savings against original budget was 44.17% which remained at 44.17% when supplementary grants were taken into account.

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24.3 Brief comments on the status of compliance with PAC Directives

Years Total No Of Paras Compliance Non-Complied % of compliance 0 0 0 1987-88 0 0 0 1988-89 0 0 0 1989-90 0 0 0 1990-91 0 0 0 1991-92 0 0 0 1992-93 0 0 0 1993-94 0 0 0 1994-95 0 0 0 1995-96 0 0 0 1996-97 0 0 0 1997-98 0 0 0 1999-00 0 0 0 2000-01 0 0 0 2001-02 0 0 0 2006-07 0 0 0 2008-09 Note: The report for the audit years 1998-99, 2002 2006, 2007-08 have not been discussed in the Public Accounts Committee (PAC)

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24.4 AUDIT PARAS 24.4.1 Irregularity & non compliance 24.4.1.1 Non-recovery of retention money from the contractor -Rs 8.86 million Para 10 of GFR Vol-I states that every public officer is expected to exercise the same vigilance in respect of expenditure incurred from public moneys as a person of ordinary prudence would exercise in respect of expenditure of his own money. As per clause 3.10.7.2 of the tender document, issued by Faisalabad Garment City Company (FGCC), under the administrative control of Ministry of Textile Industry, for the Construction of Category A and B Buildings the deduction from the 1st and the following running bills of the contractor, as security retention, shall be at 5% of gross amount of the value of work measured. Retention money will be released upon request of the contractor after satisfactory completion of the maintenance period upon certificate by the consultant/competent authority. Audit noted that the management of FGCC had not deducted Rs 8.86 million on account of 5% retention money from the contractors running bills in violation of cited provision of tender document. Audit holds that due to non deduction of retention money the contractor would have no obligation to carry out any rectification work after the completion of the project. In response to the observation, the management replied that it was decided by the building committee to take insurance guarantee for 5 % retention money so that construction works must be continued as company had to pay huge amounts to contractor. The reply is not acceptable. The retention money was required to be deducted from the contractors bills in order to secure the government interest as per agreed clause of the contract but it was not done. Thus the contractor was unduly favoured. The DAC meeting was not convened by the PAO till the time of finalization of this audit report. Audit recommends that the matter be investigated at appropriate level.

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CHAPTER 25 25 MINISTRY OF WATER AND POWER 25.1 Introduction of Ministry In country like Pakistan, where agriculture continues to form the major plan of national economy and increasing importance is being laid upon industrial development, the need for optimum development of Water and Power resources cannot be over-emphasized. Water and Power, hence take high priority in the scheme of things. In the changing scenario of private sector advent to Pakistan power sector, the Ministry of Water and Power, besides all policy matters relating to development of these two resources, performs certain specific functions also, such as carrying out strategic and financial planning for the long term master plans in public and private sector. The long term power sector projects submitted by WAPDA and its allied corporations are being scrutinized in the Ministry through its attached departments keeping in view the technical and financial viability of such projects. This indirectly results in great savings to the national exchequer as un-viable projects are either phased out or are processed with optimum financial planning and technical viability. Similarly private sector projects in power sector are being processed by Private Power and Infrastructure Board (PPIB) in close supervision of the Ministry which sets the policy guidelines for approval of private projects. Five year plans and Annual Development Programme (ADP) in Water and Power sector are all overseen by the Ministry. The Ministry of Water and Power also monitors activities in the fields of power generation, transmission and distribution and performs supervisory and advisory role for smooth operation of power sector. It also coordinates inter-provincial water sharing issues and activities related to irrigation, drainage, water logging and monitor the operation of Indus Water Treaty of 1960. Water and Power Wing are the main sub units of the Ministry including office of Chief Engineering Adviser/Chairman, Federal Flood Commission and Private Power and Infrastructure Board (PPIB). Ministry of Water and Power plans to meet future energy and water requirements throughout Pakistan. For this purpose, plans will be developed, in liaison and in consultation with provinces, WAPDA (and its successors organizations) international experts, financing arranged and monitoring systems put in place. The departments attached with the Ministry are:

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Alternative Energy Development Board (AEDB) Karachi Electric Supply Corporation (KESC) National Engineering Services Pakistan (NESPAK) National Power Construction Company (NPCC) Pakistan Engineering Council (PEC) Private Power and Infrastructure Board (PPIB) Water and Power Development Authority (WAPDA) Federal Flood Commission

25.2 Comments on Budget & Accounts (Variance Analysis) Grant wise detail of current and development expenditure is mentioned below: (Figures in Rupees) %age Grant Supplementary Grant Type Original Grant Final Grant Expenditure Excess / (Saving) Excess/ No Grant (Saving) 124 Current 322,000,000 61,159,000 383,159,000 312,816,800 (70,342,200) (18.36) 174 Development 43,910,920,000 8,503,342,000 52,414,262,000 29,505,782,606 (22,908,479,394) (43.71) Total 44,232,920,000 8,564,501,000 52,797,421,000 29,818,599,406 (22,978,821,594) (43.52) Audit noted that there was an overall saving of Rs 22,978 million, which was due to saving of Rs 22,908 million in development expenditure. Supplementary grants obtained without careful cash forecasting In order to ensure prudent financial management, Para 13(vii) of System of Financial Control and Budgeting, 2006 states that Ministries / Divisions should be able to anticipate budgetary requirements well ahead of the financial year to which the budget relates and obtain the concurrence of the Finance Division. The Finance Division is expected to decline any request for supplementary grants except in extraordinary circumstances. This document further states that the funds obtained from supplementary grants shall be expended for the purposes for which these have been sanctioned. In current expenditure, demands for supplementary grants shall not be made, except in extraordinary circumstances. During the year, supplementary grants of Rs 8,564.5 million were obtained which were 19.3% of original allocation. According to Para 71 of General Financial Rules (Volume I), while framing budget estimates, the authorities should exercise utmost foresight. Variation between estimated and actual expenditure captures the level of foresight that goes into budget formulation. As shown in the graph below, the saving in current expenditure was 2.85%, which, after

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accounting for supplementary grants increased to 18.36%. In development expenditure, savings against original budget was 32.81% which increased to 43.71% when supplementary grants were taken into account.

25.3

Brief comments on the status of compliance with PAC Directives

Years Total No Of Paras Compliance Non-Complied % of compliance 1 1 0 100% 1987-88 0 0 0 1988-89 0 0 0 1989-90 0 0 0 1990-91 0 0 0 1991-92 0 0 0 1992-93 0 0 0 1993-94 1 0 1 0% 1994-95 0 0 0 1995-96 1 0 1 0% 1996-97 0 0 0 1997-98 7 7 0 100% 1999-00 0 0 0 2000-01 0 0 0 2001-02 0 0 0 2006-07 0 0 0 2008-09 Note: The report for the audit years 1998-99, 2002 2006, 2007-08 have not been discussed in the Public Accounts Committee (PAC)

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25.4 AUDIT PARAS 25.4.1 Irregularity & non compliance 25.4.1.1 Loss on account of rent of building hired in excess of authorized limit- Rs 4.70 million Para 10 (2) of GFR stipulates that the expenditure should not be prima facie more than the occasion demands According to Finance Division OM No.F.8(69) R.14/83/2001-452 dated 18-10-2001, hiring of private properties for office accommodation by the federal government must be supported by prescribed documents. During the audit of Alternative Energy Development Board (AEDB) under the administrative control of Ministry of Water & Power for the financial year 2009-10, Audit noted that AEDB entered into a rent agreement for three years with the owner for the office building of AEDB on a monthly rent of Rs 600,000 on December 31, 2007. The contract included a provision of 10% increase each year. Audit further noted that as per the approval of Prime Minister conveyed to AEDB by Ministry of Water and Power on February 1, 2008, the rental ceiling to hire the building for AEDB headquarters was at the rate of Rs 35.64 per sq ft. subject to the condition that AEDB should not pay two months rent (Rs 1.2 million) as security to landlord in addition to one years advanced rent. Audit observed the following irregularities in this case: i. AEDB entered into an agreement on December 31, 2007 without awaiting the approval of the Prime Minister and occupied the building on January 7, 2008 whereas approval of the Prime Minister was conveyed by the Ministry of Water & Power on February 1, 2008. AEDB did not obtain the approval of Ministry of Housing and Works for space entitlement along with details of sanctioned strength of officer/official as per their letter No 10(11)/71-WIII dated 17th August 1971. Assessment certificate for the specifications of the premises by Pak PWD was not obtained.

ii.

iii.

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iv.

Authentic copy the map of the premises was also not available in the record, i.e. attested copy of drawing by the Capital Development Authority (CDA) which proves the actual covered area of the building. According to the unattested map provide by the owner the covered area of the building was 13516 sq. ft whereas based on approved rate of Rs 35.64 per sq ft. the covered area comes to 16835 sq. ft. This has resulted in excess payment of Rs 4,699,836 as detailed below:
Jan 2008 to Jan 2009 Rupees 7,200,000 5,780,520 1,419,480 Jan 2009 to Jan 2010 Rupees 7,920,000 6,357,924 1,562,076 Jan 2010 to Jan 2011 Rupees 8,712,000 6,993,720 1,718,280

Description Amount Paid Actual Payable Excess Payment

Total Rupees 23,832,000 19,132,164 4,699,836

v.

Despite Prime Ministers disagreement to the proposal of two months security payment, AEDB made a payment Rs 1.2 million on this count.

In view of the above mentioned observations, Audit holds the excess payment as unauthorized and irregular. Audit maintains that excess payment of Rs 4.70 million has put an extra burden on the exchequer. The DAC meeting was held on 10.01.2011, which directed the Ministry to carry out an inquiry and fix responsibility. Audit recommends that the decision of DAC be implemented.

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CHAPTER 26

26 MINISTRY OF WOMEN DEVELOPMENT 26.1 Introduction of Ministry The Ministry of Women Development is a national focal Ministry for the advancement of women. It plays the role of advocate, planner and coordinator of women, children, elderly and special person. It is responsible for formulation of policies and laws to meet the special needs of women ensuring that women interests and needs are adequately represented in public policy formulation by various organizations and agencies of government, promotion and undertaking of projects for development of women, matters relating to equality of opportunity in education, training, employment and facilities in health care and community development. The Ministry has a similar mandate for the children, elderly, special person and destitute. Its main objectives are: To mainstream womens issues by integration into all sectors of national development To ensure that governments policies, plans and programmes are made progender Women participate equally in decision making, implementation and benefits of national development efforts The functions assigned to Ministry of Women Development as per Rules of Business, 1973, are: i. Matters relating to formulation of public policies and laws to meet their special needs of women, ensuring those womens interests and needs are adequately represented in public policy formulation by various organs and agencies of Government ii. Registration of and assistance to womens organizations iii. Promotion and undertaking of projects for providing special facilities for women iv. Promotion and undertaking of research on conditions and problems of women v. Pakistan s representation in international organizations dealing with problems of women in bilateral contacts with other countries vi. Matters relating to equality of opportunity in education and employment and full participation of women in all spheres of national life vii. National planning and co-ordination in the fields of social welfare

231

viii. Dealing and agreements with other countries and international organizations in the field of social welfare ix. Charitable endowments x. National Council of Social Welfare grants in aid to voluntary special welfare agencies xi. Federal agencies and institutions for social welfare research xii. Administrative Control of National Zakat Foundation xiii. Custody, protection, treatment and rehabilitation of children involved in crimes, and setting up improvement of juvenile courts 26.2 Comments on Budget & Accounts (Variance Analysis) Grant wise detail of current and development expenditure of Women Development Division is mentioned below: (Figures in Rupees)
Grant Grant Type No 125 175 Current Development Total Original Grant 85,928,000 343,723,000 429,651,000 Supplementary Grant 17,666,000 17,666,000 Final Grant 103,594,000 343,723,000 447,317,000 Expenditure %age Excess / (Saving) Excess/ (Saving) 82,229,183 (21,364,817) (20.62) 143,231,251 (200,491,749) (58.33) 225,460,434 (221,856,566) (49.60)

Audit noted that: In Grant 125, there was a saving of Rs 21.364 million which was 20.62 percent of the Final Grant. In Grant 175, the saving of Rs 200.49 million was 58.33 percent of the Original Grant.

Supplementary grants obtained without careful cash forecasting In order to ensure prudent financial management, Para 13(vii) of System of Financial Control and Budgeting, 2006 states that Ministries / Divisions should be able to anticipate budgetary requirements well ahead of the financial year to which the budget relates and obtain the concurrence of the Finance Division. The Finance Division is expected to decline any request for supplementary grants except in extraordinary circumstances. This document further states that the funds obtained from supplementary grants shall be expended for the purposes for which these have been sanctioned. In current expenditure, demands for supplementary grants shall not be made, except in extraordinary circumstances. During the year, supplementary grants of Rs 17.666 million were obtained which were 4% of original allocation.

232

According to Para 71 of General Financial Rules (Volume I), while framing budget estimates, the authorities should exercise utmost foresight. Variation between estimated and actual expenditure captures the level of foresight that goes into budget formulation. As shown in the graph below, the saving in current expenditure was 4.3%, which, after accounting for supplementary grants changed to savings of 20.62%. In development expenditure, savings against original budget was 58.33% which remained at 58.33% when supplementary grants were taken into account.

26.3 Brief comments on the status of compliance with PAC Directives

Years Total No Of Paras Compliance Non-Complied % of compliance 0 0 0 1987-88 0 0 0 1988-89 0 0 0 1989-90 0 0 0 1990-91 0 0 0 1991-92 4 3 1 75% 1992-93 0 0 0 1993-94 0 0 0 1994-95 0 0 0 1995-96 0 0 0 1996-97 0 0 0 1997-98 0 0 0 1999-00 25 0 25 0% 2000-01 0 0 0 2001-02 2 0 2 0% 2006-07 0 0 0 2008-09 Note: The report for the audit years 1998-99, 2002 2006, 2007-08 have not been discussed in the Public Accounts Committee (PAC)

233

26.4 AUDIT PARAS 26.4.1 Irregularity & non compliance 26.4.1.1 Un-authorized retention by Women Crises Centers- Rs 17.16 million Para 7 of GFR Vol-I stipulates that unless otherwise expressly authorized by any law or rule or order having the force of law, moneys may not be removed from the public account for deposit elsewhere without the consent of the Ministry of Finance. Para 85 of GFR Vol-I provides that any unspent balance lapses and is not available for utilization in the next year. Rule 668 of FTR stresses that detailed adjustment accounts of all advances, supported by vouchers should be obtained. The Ministry managed 25 Women Crises Centers, now known as Shaheed Benazir Bhutto Centers for Women, all over the country in financial year 2009-2010. Audit observed that funds released to these Centers during 2009-2010 were not fully utilized by them. There was an amount of Rs 17.158 million lying unutilized in commercial bank accounts at the end of financial year. The approval of Ministry of Finance was not obtained for opening of these accounts. The centre-wise detail of unutilized balances is at Annex-9. The detail of unspent balances of centers at Hyderabad, Muzaffargarh, Jacobabad and Mirpur AJK was not provided to Audit. Audit holds that these centers were not allowed to retain unutilized balances after the close of financial year under the cited rule. By retaining unspent balance of allocated funds, the funds were made vulnerable to misuse. The management in its response mentioned that the Ministry of Finance was being approached for allowing retention of un-spent balances. Proper system will be devised to streamline the financial affairs of these centers. The reply is not acceptable as it does not address the contents of the audit observation. Further, seeking approval of Ministry of Finance after violation of rules cannot justify the violation. The DAC meeting was held on 15.01.2011, which directed that utilization reports be provided to Audit for verifying the unspent balances. However, no such reports were provided till finalization of this Report.

234

Audit recommends that: a) Unutilized balances immediately be deposited into government treasury. b) Approval of Ministry of Finance for opening of bank accounts in private banks and retaining unspent balances be obtained. c) Proper mechanism be developed to ensure utilization of funds within the financial year.

235

Annex-1

MFDAC PARAS Paras Expenditure of Rs 11.61 million on account of services of consultants hired on contract basis in violation of guidelines issued by the Establishment Division and recovery of Rs 2.30 million due to payment of remuneration after expiry of contract Irregular payment of special allowance and fixed DA amounting to Rs 2.44 Million to the officers posted in Ministry of Communications Unauthorized provision of government vehicle to protocol Officer Recovery of Rs 6.4 million on account of irregular and unauthorized appointment of consultant Recovery on account of Irregular Appointment of Program Executive (Lok Virsa) Doubtful expenditure of Rs.2.013 million on vehicles due to non-maintenance of accounting / utilization record by Lok Virsa Items costing Rs. 93,020 purchased for the residence of Secretary, Culture Recovery of Rs 448,835 from the contractor on account of rent and commission of 20% on sale proceeds of items of gift shop Non-Transfer of Rs 18.55 million into government account Recovery of Rs 7.56 million outstanding against Government of Sindh and Cantt. Executive Officer Quetta on account of Deposited Work Irregular and unjustified procurement of safe passage system Rs 7.2 Million Irregular & unauthorized expenditure of Rs 6,199,400 on account of purchase of two vehicles and payment of registration fees Management fees of USD 5.555 million and RMB 1.426 million paid to China EXIM Bank for Chashma Nuclear Power Station project loans and premium fees of USD 14.25 in respect of Sinosure-09 agreement, without receiving any disbursements. Insurance premium of USD 42.460 million paid in respect of buyer credit loan agreement No. 1260002052010210195 for Chashma Nuclear Power Station C3C4 project Non approval of competent forum before execution of project

Ministry / Division CABINET

COMMUNICATION

CULTURE

DEFENCE

ECONOMIC AFFAIRS DIVISION

236

EDUCATION

having revised cost of Rs 930.41 million Difference in debt and grants disbursements between EAD and AGPR records of Rs 8,811 million and Rs 16,603 million respectively Non-compliance of provisions of Strategic Objective Grant Agreements (SOGAs) signed between USA and Pakistan Irregular Appointment of Managing Director of NEF Non compliance of Implementation Strategy of the Project as published in official gazette Unauthorized deduction of Utility Charges of BECS Schools Rs 81.62 million Unauthorized payment of Rs. 300,000 as one time furnish grant Illegal cancellation of contract and wasteful expenditure of Rs 18.63 Million Loss of Rs 4.08 million to the government on account of rent and utility charges due to award of running of canteen contract without open competition Loss of Rs 6.28 million on account of rent and utility charges due to award of construction and running of canteen contracts without open competition Un-authorized retention and utilization of bus fee amounting to Rs 15,843,100 Unauthorized running of second shift and irregular retention/ utilization of government money Un-authorized retention of admission fee, tuition fee, fine & bus fee in college account instead of depositing in government treasury Unauthorized insurance of project vehicles Rs 2.07 million Wasteful expenditure on foreign study visit Rs 74.52 million Excess payment of Rs 2,575,591 over and above the schedule of rates Un-authorized payment of Rs 3,668,000 on account of project allowance Irregular payment of escalation cost to contractor-Rs 7.251 million Irregular purchase of training material and tool kits for Rs 9,642,600 without open tender

ESTABLISHMENT DIVISION FATA SECRETARIAT

237

Whereabouts of 72 tons of edible oil not known Heavy withdrawal of Rs 4,164,000 from the govt. account under award of scholarship without payees receipts Overpayment of Rs 766,007 due to payment of daily allowance excess than prescribed rates Irregular expenditure of Rs 1,299,050 incurred on hiring of building Irregular expenditure amounting to Rs 3,638,000 Non-production of record of project provision of drug medicines-Rs 1,540,000 Unauthorized payment of Rs 234,000 on account of nonpracticing allowance to doctors Irregular payment of hotel charges amounting to Rs 506,370 without hotel bills in aids control program Un-necessary expenditure of Rs 1,964,000 incurred on purchase of vehicle Irregular payment of salaries to 2 doctors not actually working in the agency Non-production of record In-fructuous expenditure of Rs 1,340,982 incurred on purchase and supply of non-drug durable items Un-necessary expenditure of Rs 1,493,100 on account of purchase of medicines Doubtful/irregular expenditure of Rs 419,992 on account of hot and cold charges Irregular payment of Rs 70,600 on account of TA / DA without supporting vouchers/hotel bills Irregular cash drawl of utility charges amounting to Rs 1,427,798 Non-deduction of income tax amounting to Rs 207,981 on purchases Un-authorized payment of Rs 120,261 made on account of sales tax Mis-appropriation of store worth Rs 1,050,000 received from hepatitis control program Recovery of Rs 236,280 due to unauthorized occupation of two residences Non-reconciliation of amount of Rs 1,698,452 deposited as govt. Receipts Un-necessary / doubtful expenditure of Rs 12,106,680 on account of purchase of equipments Irregular cash payment of Rs 109,581 to ETO instead of govt. Treasury on account of registration of vehicles.

238

FOOD AND AGRICULTURE

FINANCE INTERIOR

LAW, JUSTICE AND PARLIAMENTARY AFFAIRS

Doubtful / irregular payment of Rs 960,000 on account of rent of office building Un-necessary / doubtful expenditure of Rs 2,420,884 on account of purchased of medicines without supporting vouchers Overpayment of Rs 486,624 on account of house rent allowance and non-deduction of 5% rent charges Non achievement of objectives by the development project titled National Insect Museum and Insect Pest Informatics (NIMIPI) expenditure Rs 33.85 million, including irregular appointment of consultants and wastage of fund on foreign visits Non performance according to mandate expenditure Rs 100.721 million on pay and allowances of employees and other than pay and allowances of Agriculture Policy Institute Islamabad Irregular payment of rent of office building amounting to Rs 9.60 million and excess payment of rent Rs 7.43 million beyond the prescribed rates Irregular appointment as Director in Investment Companies Non-submission of adjustment accounts / audited statement of Rs 2,081,250 drawn as advance to Islamabad police HQ & Rs 3.5 million compensation for terrorist attack against Sri Lankan team at Lahore Recovery of conveyance allowance amounting to Rs 119, 940 from the entitled officers Less deduction of Income Tax amounting to Rs.136,000 Irregular payment of Rs 72,787 on account of residential telephone charges of non entitled officers Loss due to in ordinate delay in award of security contract- Rs 2.819 million Irregular retention of 543 vehicles beyond the authorization Doubtful / unjustified expenditure of Rs 394,376 on account of purchase of 3278 Kgs Ghee/Cooking Oil without tender Irregular purchase of 100 KVA diesel generating set amounting to Rs 2,042,800 and non-deduction of Sales Tax Un-authorized payment of Rs 216.45 million to Provincial Bar Councils and 110 Bar Associations without any mention in the Legal Practitioners and Bar Councils Act, 1973

239

LIVE STOCK & DAIRY DEPARTMENT

NATIONAL ASSEMBLY

NARCOTICS CONTROL PAEC PETROLEUM & NATURAL RESOURCES

Audited accounts of payment on account of grant-in-aid to Pakistan Bar Council not obtained - Rs 20 million Irregular payment of Rs 252,500 on account of POL to Secretary/Registrar(PVMC) Irregular re-imbursement of Rs 186,878 on account of telephone/ mobile/internet charges Registration fee received in cash instead of receiving in bank draft Rs 28.8 million Irrational estimated annual revenue Rs.8 million and total Rs.40 million by the National Veterinary Laboratory Overpayment of Foreign DA to Category-I officers on account of hotel charges Loss due to non-deposit of sale proceeds Rs. 2.137 million Recovery of snatched / theft vehicles Rs. 1.878 million Irregular and unauthorized expenditure for purchase of vehicles Rs. 11.810 million Unjustified claims of medical reimbursements Rs.350, 000 Irregular deployment of heavy fleet of vehicles on general / protocol duties Theft of two (02) official vehicles Recovery on account of conveyance allowance Rs. 119,040 Irregular and uneconomical purchase of a vehicle amounting to Rs 937,000 from a private individual instead of a registered firm Non adjustment of advances $ 15,616 (Rs 1.33 million) Irregular Releases of Rs. 49.073 million to Civil Armed Forces for Deployment of Troops for the Protection of Gas Pipelines. Irregular expenditure of Rs. 118,983 on Account of Installation of Additional Telephone in Secretarys Office. Non-Conducting of Internal Check and Physical Verification of Store/Stocks Unauthorized Payment of Rs 6.946 Million on Account of 50% as Allowance to the Employees of Hydrocarbon Development Institute of Pakistan. Irregular Expenditure Amounting to Rs. 799,460 on Unauthorized Retention of 06 Vehicles as General Duty. Unauthorized Expenditure of Rs. 216,092 on Mobile Phone Facility Recovery Thereof. Non-utilization of Costly Equipments Since 2006 due to closure of CNG Station. Non-recovery of Long Outstanding Testing Fee Amounting to Rs. 1.293 Million.

240

PORTS AND SHIPPING

TEXTILE INDUSTRY

Testing of Fuel and Lubricants at the HDIP Laboratory without Accreditation. Irregular / Unauthorized Expenditure of Rs. 331,116 on Account of POL and Repair & Maintenance. Unjustified Gas Charges and Nominal Rest House Charges. Irregular/Unauthorized Establishment of Temporary Headquarters (THQs) outside GSP (Hq), Quetta. Mis-Classification of Rs. 0.825 million on Account of installation of Gas Pipeline and Contingent paid staff. Unauthorized installation of Residential Telephone for NonEntitled Officers and Amount of Rs. 115,277 paid irregular. Recovery of Rs. 61,165 from the Allottees of GSP Residential Colony Quetta. Recovery of Rs. 5,850,266 on account of non-adjustment of TA/DA Advances. Non-recovery of penalty for non-completion of work Excess expenditure due to delay in consultancy work Irregular charge of Rs 98.186 million to project for purchase of vehicles and their maintenance Over payment of Rs 437,840,000 due to double provision of mobilization/demobilization for dredger plant. Irregular award of additional consultancy costing Rs. 16.241 million Loss of Rs. 444,081 million due to non-recovery of long outstanding sale proceeds forms Customs Authority. Loss of Rs 104.877 million due to non-recovery of Wharfage Charges. Irregular and unauthorized allotment of plots to the officers of KPT and others. Irregular and unauthorized allotments of plots to the employees of the KPT in the Hawks bay Scheme. Exemption of Stamp duty amounting to Rs. 30.076 million on work of dredging and reclamation. Irregular leasing of Commercial property on very nominal conditions and without safe guarding Government interests. Irregular expenditure for more than Rs 404.881 million due to acceptance of Conditional Tenders. Irregular expenditure Rs.51.343 million beyond the approved tender costs of CAT-A Package I Building Irregular inclusion of invalid clauses into Tender documents, resulting into loss to Govt. due to increase of an estimated amount for Rs.5.6 million. Uneconomic expenditure for Rs. One Million without

241

advertising the opportunities in Website / Print media. Irregular and uneconomical payment of rent of office building to Rs. 3.757 million and excess payment of rent Rs 2.673 (PCSI) Non-realization of Cotton Standardization Fee (CSF) resulted into a loss of Rs. 177.245 million to the Government. (PCSI) Non-performance of Functions as provided for in the AEDB Ordinance 2009/AEDB Act, 2010 Recovery of amount of Rs 454,844 in respect of unauthorized expenditure on a private vehicle Splitting up of projects to avoid approval of ECNEC Unnecessary Purchase of vehicle for Minister of Youth Affairs by irregularly re-appropriating funds from the National Internship Program amounting to Rs 1.86 Million and irregular expenditure on the condemned vehicle amounting to Rs 0.46 million

WATER AND POWER

YOUTH AFFAIR

242

Annex-2 S. No. Work

Amount of receipts in 16 contracts Amount of Receipt involved in contracts (Rs in Million) 23.57 3.2 21.48 12.5 23 8.3 92.05

1 2 3 4 5 6 7 8 9

Training & Workshop / seminars Cafeteria (TUC Shop) Museum operation and maintenance/ marketing Weekly Craft/ Artisan Bazar Roof Top theatre Artisan at work festival Open Air Theatre Museum shop Other sub-agreements Total

243

Annex-3 Detail of extensions in contracts

Sr.# 1 Item of Umbrella Contract agreement Training & Workshops signed on 21-07-2004 for a period of 5 years First Subagreement Rental deed (undated) for a period of 05 years Second Subagreement Agreement for Establishing Virsa College of Arts on 20-07-2005 for a period of 30 years as per clause 2 of the said agreement. Rental Deed of Museum Cafeteria involving 4159 square feet of land on 30-09-2008 for a period of 10 years as per clause 9 of said agreement. Third Subagreement Rental deed firms office and NICS administration block on 20-09-2008 for a period of 10 years as per clause 8 of said agreement.

Cafeteria Signed on 21-07-2004 for a period of 5 years

Rental Deed Museum Cafeteria involving 630 square feet of land Date of signing not mentioned for a period of five years as per clause 12 of said agreement. Rental deed extended on 3009-2008 but time period for extension not mentioned.

Museum Operation and Maintenance/Marketing Signed on 21-07-2004 for a period of 5 years

244

Annex-4
S. No.

Detail of outstanding dues along with interest accrued

Description Outstanding for the period Outstanding Amount (Rs) Compound Interest accrued @10% (Rs) 525

2.

3.

4.

5.

Rent of Cafeteria Balance outstanding Rent outstanding for the period 01.10.2008 to 31.08.2010 @ Rs 31250 Craft Bazaar Rent of craft bazaar shops @ Rs 46,666/- w.e.f 01.12.2007 to 31.08.2010 Firms Office Rent outstanding @ Rs 12,870/- w.e.f 22.11.2008 to 23.08.2010 difference w.e.f May 2007 to July 2007 Rent of sale centre Rent of sale centre @ Rs 35,000/-per month w.e.f 23.06.2007 to 30.09.2008. Rent outstanding for the period 01.10.2008 to 31.08.2010 @ Rs 43,750/- (23 months) Booking of Lok Virsa facilities/Spaces open Air Theater and other Facilities

1 Year 10 Months (22 months)

2748

718750 2 year 09 Months (33 months) 1,539,978

137,204 461,470

01 year 09 Months (21 months) 01 year 04 Months (16 Months) 01 year 11 Months (23 Months) Since 1/2006 04 YEAR 08 Months(56 Months) Since 7/2006 04 year 01 Month (50 Months) Since 7/2007 04 year 01 Month (50 Months) Since 12/2007 02 year 08 Months (32 months )

270,270

49,057

3,510 533,162

637 72,055

1,006,250

202,064

159000

89,142

116,450 245000 11,740 24700 Total: 428,000 84,000

6.

Share of children Festival

24,342

245

7.

8.

9.

Electricity Charges of firms office Outstanding of November 2006 to July 2010 Electricity charges of Craft Bazaar Outstanding from November 2006 to July 2010 other electricity charges Electricity charges of NICS Outstanding from August 2008 to July 2010 Total

03 years 08 Months (44 Months) 03 years 08 Months(44 Months) 01 year 11 Months(23 Months)

852,552

357,021

830,319

347,710

136,699

27,450

6,406,938

1,896,867

246

Annex-5

Payment Made to M/s Telenor Month May-June 2010 Apr-10 Mar-10 Feb-10 Jan-10 Dec-09 Nov-09 Oct-09 Sep-09 Aug-09 Jul-09 Jun-09 May-09 Apr-09 Mar-09 Feb-09 Jan-09 Jan-09 Dec-08 Nov-08 Oct-08 Sep-08 Aug-08 Jul-08 Jun-08 May-08 Apr-08 cash Drawn for payment of mobile phone bills Total Cheque No. 390113 387531 648684 385011 650587 623779 938457 623729 608279 688806 4061116 4061111 4061104 B-071012 94737 B-094717 563947 563904 2772503 728348 cash cash 464370 450651 450612 9763899 9763900 Amount (Rs) 90,752 48,609 52,376 50,966 52,599 51,377 48,989 49,048 43,992 41,148 41,290 44,041 45,014 43,250 41,396 42,658 15,933 42,849 41,745 40,454 41,579 41,129 42,114 42,058 40,512 31,146 2,210 200,000 300,000 1,669,234

247

Annex-6 List of employees promoted

Sr. No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. Name of Official Waqar Gillani M. Shahbazullah Abdul Hanan Ms. Sadia Atta Mr. Nabila Riaza M. Bilal Aziz Mr. Meharullah Ms Shazia Sarfaraz Muhammad Ansar Syed Zahir Hussain Ms. Sumera Mushtaq Ms. Zubaida Ch Mr. Farid ud Din Mr. Tahir Mehmood Mr. Irshad Hussain Mr. Farman Ali Mr. Khalid Mehmood Designation Initial Media Officer (BS-16) A.D (BPS 17) A.D (BPS 17) A.D (BPS 17) A.D (BPS 17) A.D (BPS 17) A.D (BPS 17) A.D (BPS 17) A.D (BPS 17) A.F.O (BPS 16) A.F.O (BPS 16) A.F.O (BPS 16) A.F.O (BPS 16) A.F.O (BPS 16) A.F.O (BPS 16) A.F.O (BPS 16) A.F.O (BPS 16) Date of Appointment 04-03-96 27-09-98 07-12-95 19-12-95 21-01-96 03-11-08 02-02-96 02-02-96 25-11-08 21-08-95 24-11-07 30-06-97 05-01-96 04-09-96 01-10-96 16-03-99 04-09-96 Promoted to Director (BPS 19) D.D (BPS -18) D.D (BPS -18) D.D (BPS -18) D.D (BPS -18) D.D (BPS -18) D.D (BPS -18) D.D (BPS -18) D.D (BPS -18) A.D (BPS-17) A.D (BPS-17) A.D (BPS-17) A.D (BPS-17) A.D (BPS-17) A.D (BPS-17) A.D (BPS-17) A.D (BPS-17) Date of promotion 16-10-09 18-07-07 03-09-07 01-11-07 04-02-10 01-10-09 15-12-09 10-04-10 13-04-10 21-07-07 13-04-10 24-02-10 29-03-10 31-03-10 31-03-10 31-03-10 09-08-10

248

Annex-7 Funds collected and expenditure made by Islamabad Model Colleges

College ICG, F-6/2 IMCG F-6/2 IMCG F-7/4 IMCG F-8/1 IMCG I-8/4 IMCG G-10/2 IMCG I-10/4 ICCW F-10/3 Total Year 2007-08 and 2008-09 2006-07 to 2008-09 2008-09 2006-07 to 2008-09 2008-09 2006-07 to 2008-09 2006-07 to 2008-09 2005-06 to 2008-09 Receipt (Rs) 55,800,540 38,776,963 16688043 2,765,472 8446949 1,195,205 21,209,890 23,296,473 168,179,535 Expenditure (Rs) 48,347,937 29,716,091 13,291,709 2,792,856 5,590,694 1,334,447 15,994,428 18,988,473 136,056,635

Annex-7-A
Name of College

Collection of funds by the F.G Colleges at Islamabad

Amount collected during 2005-2009 (Rs) 26,798,285 4,447,785 4,435,903 8,242,159 11,102,926 7,942,072 62,969,130 Amount Expended during 2005-2009 (Rs) 15,485,057 Not known to audit 2,892,947 7,273,992 5,418,543 6,938,684 38,009,223

F.G College for Women, F.7/2 F.G Margala College for Women, F.7/4 F.G Fatima Jinnah College for Women, Hummak F.G College for Men, H-8. F.G College for Men, H-9 F.G College for Men, F-10/4 Total

249

Annex-8

Loss by accepting low quality printing paper in AIOU Rate per Ream Rs)

Item and Specs WPP Size 20x30/68 GSM WPP Size 23x36/68 GSM WPP Size 20x30/80 GSM WPP Size 23x36/80 GSM

Supplier

Quantity Purchased

Paid Amount (Rs.) (

Rate per K.g as per bid document 62.84

Market per K.g rate 55

Difference per kg 7.84

Weight per Ream (kg) 13.161

Loss (Rs) 20,636,448

M/S Sayid Paper Mills , Lahore M/S Sayid Paper Mills , Lahore M/S Z.A Corporation, Lahore M/S Z.A Corporation, Lahore

200,000

827

165,400,000

55 10,000 1141 11,410,000 62.83 50 50,000 957 47,850,000 61.82 50 20,000 Total Rs. 1322 26,440,000 251,100,000 61.87

7.83

18.163

1,422,163

11.82

15.484

9,151,044

11.87

21.368

5,075,763

36,285,418

250

Annex-9

Un-authorized retention of Rs 17.158 million by Women Crises Centers

(Rs in million) Total Balance Amount as on released 01.07.2010 6.452 0.000 2.362 0.729 2.190 0.532 2.000 0.394 2.200 2.000 0.078 2.000 0.654 1.600 0.002 2.000 0.751 2.800 1.290 1.900 21.052 4.430 2.718 0.829 2.452 0.830 2.092 0.840 2.500 0.043 3.202 1.244 2.390 0.770 2.125 0.957 2.317 0.001 1.000 3.385 20.796 8.899 2.000 0.234 1.400 0.764 1.900 0.729 2.000 1.250 2.102 8.550 3.829

Sr No 1 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 1 2 3 4 5

Location of Centre Islamabad Bahawalpur Multan Nawabshah Hyderabad Abbotabad Sibi Mirpur,AJK) Sialkot Faisalabad Muzafargarh Lahore Vehari Sahiwal Mianwali Karachi Peshawar Kohat Quetta Rawalpindi Khushab Swat Khuzdar Jacobabad D.G Khan

Project Cost

Commencement date 13.03.02 19.09.05 19.09.05 19.09.05 19.09.05 19.09.05 19.09.05 19.09.05 19.09.05 19.09.05 19.09.05 13.05.04 15.12.97 23.06.01 26.02.03 13.05.04 13.05.04 26.02.03 26.02.03 13.05.04 17.05.06 17.05.06 17.05.06 17.05.06 17.05.06

Allocation 2009-10 7.016 2.8 2.2 2 2.2 2 2 2 2 2.8 2 22 3.4 3 2.2 2.5 4 2.7 2.5 2.7 1 24 2 2 2 2 3 11

30.683 7.967 7.967 7.967 7.967 7.967 7.967 7.967 7.967 7.967 7.967 79.670 12.366 15.000 10.360 11.778 12.632 11.818 9.078 9.078 13.984 106.094 7.664 7.471 7.471 7.471 7.471 37.548

Revised Allocation 2009-10 7.016 2.800 2.200 2.000 2.200 2.000 2.000 2.000 2.000 2.800 2.000 22.000 3.400 3.000 2.200 2.500 4.000 2.700 2.500 2.700 1.000 24.000 2.000 2.000 2.000 2.000 2.400 10.400

Released for 1st Qtr 0.643 0.560 0.440 0.400 0.440 0.400 0.400 0.400 0.400 0.560 0.400 4.400 0.680 0.600 0.440 0.500 0.800 0.540 0.500 0.540 0.000 4.600 0.400 0.400 0.400 0.400 0.000 1.600

Released for 2nd Qtr 0.7016 0.102 0.200 0.200 0.220 0.200 0.200 0.200 0.200 0.200 0.200 1.922 0.340 0.102 0.102 0.250 0.202 0.175 0.000 0.102 0.000 1.273 0.132 0.000 0.000 0.200 0.000 0.332

Released for 3rd Qtr 2.088 0.700 0.550 0.400 0.550 0.400 0.500 0.400 0.500 0.700 0.500 5.200 0.850 0.750 0.550 0.500 1.000 0.675 0.625 0.675 0.000 5.625 0.500 0.500 0.500 0.500 0.750 2.750

Released for 4th Qtr 3.019 1.000 1.000 1.000 0.990 1.000 0.900 0.600 0.900 1.340 0.800 9.530 0.848 1.000 1.000 1.250 1.200 1.000 1.000 1.000 1.000 9.298 0.968 0.500 1.000 0.900 0.500 3.868

251

Muzaffarabad Grand Total

20.557 20.557 274.552

01.07.09

6.52 6.52 70.54

6.522 6.522 69.938

1.304 1.304 12.547

0.311 0.311 4.540

1.6305 1.6305 17.294

3.276 3.276 28.991

6.522 6.522 63.372

0.000 17.158

252