The Auditor General of Pakistan (AGP) has detected three cases to the tone of Rs2.668 billion of unauthorized loaning and issuance of wheat to irrelevant flour mills by the Khyber Pakhtunkhwa Food Department during financial year 2014-15, said AGP Report 2015-16 on the accounts of KP Department. According to the AGP Report, during the financial year 2014-15, in the office of Director Food, Khyber Pakhtunkhwa, it was noticed that Chief Manager, Bank of Khyber was requested vide letter No.7139/AC-1304-PASSCO dated 19.12.2014 for payment of Rs1.800 billion to the Director Food, Punjab, which the bank authorities paid vide DD No.389727 dated 17.12.2014 without the approval of the competent authority for obtaining loan for payment to the Food Department, Punjab.
Furthermore, the government of KP had allocated sufficient budget for the purchase of wheat from PASSCO/Punjab. Therefore, payment was required to have been made from the allocated budget. Thus obtaining loan from the bank was unauthorized.
The audit said that the unauthorized loaning and payment occurred due to financial mismanagement and non-adherence to the allocation of funds by the Finance Department and undue favour to the bank authorities in the shape of payment of interest to them.
The irregularity was pointed out in August 2015 to which the management replied that wheat was purchased on emergent basis to meet the requirements and after fulfilling of required formalities. The reply was not convincing because in the summary duly approved by the Chief Minister KP as well as Finance Department, it was clearly mentioned that upfront payment would be made from Food Department Account-II and then from loan from bank. Sufficient balance in Food Account-II was available therefore payment was required to have been made from the same account.
The audit requested the department repeatedly for holding Departmental Accounts Committee (DAC) meeting; however DAC meeting was not convened till the finalization of the report. So the audit had recommended investigation into the matter to fix responsibility.
The second case of the unauthorized loan amounting to Rs801.28 million was pointed out during the financial year 2014-15, in which the Director Food, Khyber Pakhtunkhwa obtained the loan from the same Bank of Khyber and paid it to PASSCO as advance payment for incidental charges of 100,000MT wheat despite the fact that cost of wheat worth Rs 3000 million was paid from Food Account-II.
It is added that the government of Khyber Pakhtunkhwa had allocated sufficient funds in the Food Account-II for the payment of cost of wheat as well as incidental charges. Finance Department vide a letter had clearly mentioned and instructed that payment of cost of wheat will be met out from the same account. Therefore, in the presence of sufficient budget and clear instruction of Finance Department obtaining interest bearing from the Bank of Khyber for payment of incidental charges was unauthorized.
The audit had attributed the unauthorized loaning to financial mismanagement and non-observance of the instructions of Finance Department and undue favour to the bank in the shape of payment of interest.
The unauthorized payment was pointed out in August 2015 and the management replied that the availability of funds was insufficient for all the requirements i.e. cost of wheat and incidental charges in Food Account-II. The cost of wheat amounting to Rs3.000 billion was met out through AC Bills while the cost of incidental charges amounting to Rs801.28 million was arranged from the Bank of Khyber. Due to insufficient amount in the Food Account only Rs803.21 million was kept as balance for the usual expenditure of the department. Loan was obtained on proper bidding and thus no unauthorized loan obtained.
Despite repeated requests of the audit, the department failed to convene DAC meeting. The audit disagrees with the reply and recommended investigation into the matter and fixing of responsibility against the person(s) responsible for unauthorized loans.
The third case was the unauthorized issuance of wheat worth Rs66.84 million to irrelevant flour mills that was noticed during financial year 2013-14. According to the case, District Food Controller, DIKhan issued 3561MT wheat costing Rs66.84 million to Kajal Flour Mills Tank and Qadri Flour Mills without any authority.
The issuance of wheat of these flour mills was unauthorized as these mills were situated in the Tank district for which separate quota of 39MT was allowed. Thus the quota of DIKhan was affected.
The lapse occurred due to extending undue benefit to the flour mills situated in Tank district. The matter was reported to the management in January, 2015, which replied that wheat had been issued to the said flour mills on the directives of Director Food KP.
In the DAC meeting held in July 2015, the department repeated the previous reply. DAC directed to produce orders of the Director or Secretary Food, who authorized the issuance of wheat quota to Tank. No progress was intimidated till finalization of this report. So the audit recommended the compliance of DAC decision.