AGP report: Rs 196.594 billion financial mismanagement detected in KP accounts

The Auditor General of Pakistan (AGP) has detected three cases of financial mismanagement amounting to Rs 196,594 billion of non-surrendering of anticipated savings, short realization of targeted revenue and decrease in the closing cash balance during financial year 2014-15, said AGP report 2015-16 on the accounts of the Khyber Pakhtunkhwa departments.
The report has been presented in the provincial assembly and the Speaker has referred it to the Public Accounts Committee (PAC) of the house. The first case of the financial mismanagement to the tune of Rs.57,919.85 million was detected during review of the Appropriation of Accounts of the government of Khyber Pakhtunkhwa for financial year 2014-15. It was revealed that the allocated funds to the executing agencies could neither be fully utilized nor timely surrendered by the Grantees resulted into lapse of funds worth Rs 57,919.85 million.
The irregularity occurred due to non-adherence to the provisions of rules.
The matter was reported to the Accountant General (AG) Khyber Pakhtunkhwa in October 2015, which replied that the departments concerned shall explain their position before the PAC as and when required.
The issue was also discussed in the Departmental Accounts Committee (DAC) meeting held in November, 2015. The Accountant General reiterated the previous reply. No further progress was reported till finalization of this report. Audit has recommended that response of the quarter concerned be obtained and position be explained before the PAC.
The second big irregularity noticed by the AGP was the short realization of targeted revenue to the tone of Rs.118,435 million. During the review of the Financial Statement and Finance Accounts of the government of Khyber Pakhtunkhwa for financial year 2014-15, it was noticed that revised estimates of the receipts of Rs.441,458 million was approved by the legislature in the estimates of receipts of 2014-15 against which Rs 323,023 million as revenue receipt and Rs 2540 million receipts from third party were shown realized, which showed that there was an overall shortfall of Rs 118,435 million in the realization. Despite the fact that overall targets were decreased from original estimates of Rs.506,319 million to Rs.441,458 million in the revised estimates.
The record showed that main shortfall was in the development surcharge and royalties/divisional/dividend and profit share. The audit held that target were required to have been realized which was not found to have been done. The short realization occurred due to fixing non-realistic targets by the Finance Department.
When pointed out in September, 2015, the management stated that the setting of Revenue Targets for the departments of the provincial government is the authority of Finance Department. Therefore, the observation is proposed to be forwarded to the Finance Department for clarification.
The reply of the Finance Department was conveyed by the Accountant General in November, 2015, wherein it was replied that the original targets of the revenue realization fixed by the federal government were revised and less releases were made.
The audit has recommended that achievable targets needs to be fixed according to the actual realization in the previous years. Similarly, during the review of the Financial Statement and Finance Accounts of Khyber Pakhtunkhwa for financial year 2014-15, it was noticed that cash balance at the close of the financial year decreased by Rs 20,239 million. There was a closing cash balance of Rs.55,069 million at the end of financial year 2013-14, which was decreased to Rs 38,840 million, meaning thereby, that the cash balance was utilized by the provincial government resultantly decrease in the closing cash balance to the extent of Rs 20,239 million. This state of affairs shows that budget for the year under report was not prepared according to the actual receipts, in other words, receipts targets were not fully achieved.
The short coming occurred due to utilization of Public Account towards expenditure and decrease in the closing cash balance was the poor budgeting by the financial analysts and weak financial controls regarding receipts realization.
When pointed out in September 2015, the management stated that the observation is proposed to be forwarded to Finance Department for clarification. The reply of the Finance Department was conveyed by the Accountant General in November, 2015, wherein it was replied that the original targets of the revenue realization fixed by the federal government were revised and less releases were made.
In the DAC meeting held in December, 2015, it was decided that response of the Finance Department may be obtained. But, no further action reported till the finalization of this report. The audit has recommended that efforts needs to be made to accelerate the revenue realization and to increase the cash balance of the provincial government.