Auditor General of Pakistan (AGP) has detected embezzlements, irregularities and mismanagement of more than Rs 176.95 billion in telecommunication sector. The Audit Report of the Accounts of Telecommunication sector for Audit year 2011-12, a copy of which is available with Business Recorder, revealed that the management of telecom entities remained weak, which resulted in non-recovery of a huge amount of Rs 126.64 billion pointed out in eighteen paras.
The report says that violation of rules, contract agreements and irregular expenditure/payment was pointed out in sixty five cases amounting to Rs 25.875 billion.
The report further revealed that lack of internal controls in utilisation of resources, promotions, appointments, amendment in regulations & award of work amounting to Rs 4.95 billion was noted in 56 cases. The report says that extra allowances and financial benefits, leave encashment, bonus and irregular payment of TA/DA were highlighted in fourteen cases amounting to Rs 114.607 million while irregular/wasteful/unjustified expenditure amounting to Rs 1.599 billion was noted in eleven cases.
Loss to government of Pakistan due to non-investment of Rs 1.55 billion was observed by audit department in one case while non capitalisation of assets amounting to Rs 63.47 million was noted in one case. The report pointed out to irregular investment of USF and R & D funds amounting to Rs 43.215 billion. Federal Government vides Rule 7 of USF rules 2006 had decided that the amounts from the fund shall be invested only in Government risk free financial securities or schemes.
Contrary to the rule, USF Policy Committee had been investing amounts in term deposit receipts with commercial banks. Thus violating the rules and putting the funds at risk. The Risk Free securities are T-bills, PIB, Skuke, Jarah, National Saving Schemes etc. The amounts should have been invested in any of these securities with maximum return. An amount of Rs 43.215 billion was invested up to 30.06.2011 in the Term Deposit Receipts instead of Risk Free Securities.
The audit report pointed out this irregularity to the management in October and to the PAO in December 2011. It was told that the Government security were secure but cannot be classified as risk free when market was too volatile. As buying/selling rate of the said securities were traded in primary/secondary market. Moreover, institutional investment in National Savings Schemes (NSS) had been prohibited by the Government. The rates offered by the NSS were comparatively low and subject to withholding taxes, which were not applicable on Federal Government Fund. In view of above, the investment had been made in the risk free securities.
DAC in its meeting held on December 29, 2011 directed the management that discontinuation of the practice be got verified from audit. No further progress was reported till finalisation of this report, it added. Similarly in another case, the report pointed out to the receivables from PTA amounting to Rs 64.085 billion and operators Rs 41.13 billion on account of USF.
In violation of the rules, it said, PTA and operators had not remitted the amounts of USF to the administration of USF at MoIT at the close of June 2011 as reported in the audited accounts of Funds. There was no reconciliation between PTA, Finance Division and Administration of Funds. No proper records were with the Funds Administration; therefore, the actual status with correct figures was not verifiable. Chartered Accountant firm had also given the following verdict "we are unable to determine the correctness of the balances shown against these accounts in the Financial Statements of Funds".
Audit pointed out the irregularity to the management during February and October 2011 and the matter also reported to the PAO in December 2011. It was replied that the responsibility to recover receivable from operators rest with the Authority. MoIT had the power to issue policy directive as and when it considered necessary to the authority not inconsistent with the provision of the Act on the matter related to the telecom policy. However, MoIT formulated recovery wing under the chairmanship of additional secretary IT to devise mechanism for recovery of receivables from the operators.
DAC in its meeting held on December 29, 2011 directed the management to pursue the recovery from PTA vigorously. No further progress was reported till finalisation of this report. The report further reveals that non-realisation of Rs 11.897 billion from Ministry of Finance. Ministry of Finance on 05.05.2007 asked MoIT to open an assignment account and devise accounting procedure for USF and R&D funds in consultation with AGP so that Public Account amounts transferred by PTA may be shifted to that account. MoF further reiterated vide OM No 3(17)-CF-11/2003-381 dated 12.03.2008 that accumulated amount on account of USF placed in the public account may be withdrawn by the MoIT through assignment account. It was further clarified on 09.06.2008 that the amount received by MoF will be earmarked for USF and R&D Fund and would not be utilised for any other purpose. Amount transferred by PTA to MoF will be transferred to MolT on their demand within seven days. MolT will utilise these funds for the purpose defined in the Act.
It was observed that MolT had not opened an assignment account and no procedure was devised. Therefore, the amount of Rs 11.897 billion transferred by PTA to MoF in Public Account was not transferred to funds account by MoF. This was an indicative of weak management of funds, they report added.
DAC in its meeting held on December 29, 2011 directed the management that case be taken up with Ministry of Finance for recovery. No further progress was reported till finalisation of this report. In another case the Audit Report-2011-12 says that Pakistan Telecommunication Authority (PTA) did not recover an amount of Rs 16.59 billion during the financial year 2010-11. Audit pointed this out to the management in September 2011 and to PAO in December 2011. It was replied that instalment plan offered to world call under which first two principal amounts of Rs 1.26 billion were recovered. A demand notice was issued to Warid Telecom for Annual Spectrum Administrative Fee (ASF) for the year 2010-11. Like wise demand notice was sent to Ufone for making the payment of ASAF. However, Ufone had challenged the levy of ASAF in the High court. An amount of Rs 7.1 million was adjusted from Worldcall for the year ended December 31, 2008 to 2010. Demand notices were sent to Great Bear and Worldcall Telecom followed by reminders. Hence, show cause notices were issued to the companies. However, they did not pay the ASF so far.
In another case, the report says that unauthorised expenditure of Rs 13.176 billion without budget allocation and expenditure incurred from main collection accounts. According to details, PTA incurred an expenditure of Rs 13.176 billion from PTA collection accounts for payment to FBR, FAB, license fee for vehicles, employee's CPF, gratuity, repayment of World Bank Loan and Prime Minister Flood Relief Fund etc without budget allotment. The expenditure was not approved in the budget estimates for FY 2010-11. Payments were made from collection accounts instead of DDO's account. The expenditure was incurred over and above the approved budget allotment made for PTA. Further, PTA made payment of Rs 4.7 billion to the FBR on account of Income Tax on 30.06.2011 which was re-funded by FBR on 08.07.2011. This transaction was made only to avoid remittance of surplus fund to FCF.
Audit pointed out this to the management in September 2011 and to PAO in December 2011. It was replied that PTA did not allocate budget for payment of tax liability as PTA had contested the tax levied by FBR. Therefore, no amount was transferred to DDO account for payment of Income Tax. An amount of Rs 10.28 million was transferred from PTA Collection Account No 12407-6 to PTA's GPF/CPF account. An amount of Rs 114.028 million was paid to World Bank as repayment of World Bank Loans. This payment was not a budgetary expenditure; hence, it was paid from PTA Collection account.
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