ABBREVIATIONS AND ACRONYMS

ACA Associate Chartered Accountant

ADB Asian Development Bank
AGP Auditor General of Pakistan
AGPR Accountant General of Pakistan Revenues
AMSL Agricultural Marketing and Storage (Pvt.) Limited
APTMA All Pakistan Textile Mills Association
BHRC Board Human Resource Committee
BoD Board of Directors
BoG Board of Governors
BoM Board of Management
BOM Built Operate and Maintain
BoP Bank of Punjab
BoQ Bill of Quantity
BoT Board of Trustees
BPPL Byco Petroleum Pakistan Limited
CA Chartered Accountants
CAA Civil Aviation Authority
CBA Collective Bargaining Agent
CBRT Central Bank of the Republic of Turkey
CCOP Cabinet Committee on Privatization
CCP Central Committee for Procurement
CDA Capital Development Authority
CDR Cash Deposit Receipt
CDWP Central Development Working Party
CEC Cotton Export Corporation
CED Central Excise Duty
CEO Chief Executive Officer
CFC Customer Facilitation Centre
CFO Chief Financial Officer
CIA Chief Inspector of Armament (POFs)
CMD Contract Management Department
CMS Consumer Meter Station (SNGPL)
CNG Compressed Natural Gas
CoA Contract of Affreightment
i
COCO Company Owned and Company Operated
CoI Certificate of Investment
CPC Central Purchase Committee
CPC Central Procurement Committee
CPF Contributory Provident Fund
CSF Chairman Special Fund
CST Comparative Statement
CVT Capital Value Tax
DAC Departmental Accounts Committee
DDWP Departmental Development Working Party
DF Dealer Finance
DFA Deputy Financial Advisor
DGCA&E Directorate General of Commercial Audit & Evaluation
DGDP Director General Defence Purchase (POFs)
DGM Deputy General Manager
DHA Defence Housing Authority
DWP Development Working Party
ECC Economic Co-ordination Committee
ED Executive Director
EFU Eastern Federal Union
EIZ Eastern Industrial Zone
EOBI Employees’ Old Age Benefits Institution
EOGM Extra Ordinary General Meeting
EPS Earnings per Share
EPZA Export Processing Zones Authority
EPZs Export Processing Zones
EVC Electronic Volume Corrector (SNGPL)
EWT Early Well Testing
FBC Federal Bank for Cooperative
FBR Federal Board of Revenue
FDIBL First Dawood Investment Bank Limited
FIA Federal Investigation Agency
FIR First Information Report
FIU Federal Investigation Unit
FMU Financial Monitoring Unit

ii
FoB Free on Board
GBTS Gulshan-e-Benazir Township Scheme
GCP Ghee Corporation of Pakistan
GDS Gas Development Surcharge (SNGPL)
GEPZ Gwadar Export Processing Zone
GFR General Financial Rules
GM Gene General Manager
GoP Government of Pakistan
GoPb Government of Punjab
GPA General Power of Attorney
GPA Gwadar Port Authority
GPF General Provident Fund
GRR Guaranteed Rate of Return
GST General Sales Tax
GTDMC Gujranwala Tools, Dies and Moulds Centre
HBFCL House Building Finance Company Limited
HEC Higher Education Commission
HM3 Hundred Cubic Meter
HMC Heavy Mechanical Complex (Pvt) Limited
HR Human Resource
HRB Human Resource Budget
HRD Human Resource Development
HSD High Speed Diesel
IA&E Inspectorate of Armament of Explosives (POFs)
IAS International Accounting Standards
IATA International Air Transport Association
IC Investment Committee
ICB International Competitive Bidding
IMF International Monetary Fund
INTOSAI International Organization of Supreme Audit Institutions
IPC Interim Payment Certificate
IPO Initial Public Offering
IT Information Technology
KBO Karachi Booking Office
KCIP Korangi Creek Industrial Park
KEPZ Karachi Export Processing Zones
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KESC Karachi Electric Supply Corporation
KIBOR Karachi Inter-Bank Offered Rate
KPT Karac Karachi Port Trust
KS&EWL Karachi Shipyard & Engineering Works Limited
KSSL Kissan Support Services (Pvt.) Limited
KTDMC Karachi Tools, Dies and Moulds Centre
LAM Limit of Authority Manual
LC Letter of Credit
LD Liquidated Damages
LoA Letter of Award
LPC Last Pay Certificate
LPG Liquefied Petroleum Gas
LPS Late Payment Surcharge
MAG Military Accountant General
MBA Master of Business Administration
MCF Metric Cubic Feet (SNGPL+OGDCL)
MCO Mobile Credit Officer
MCS Master of Computer Science
MD Managing Director
MFDAC Memorandum for Departmental Account Committee
MINFA Ministry of Food and Agriculture
MIS Management Information System
MMBTU Million Metric British Thermal Unit
MMCF Million Metric Cubic Feet
MoD Ministry of Defence
MODP Ministry of Defence Production
MOIP Ministry of Industries and Production
MoP Ministry of Production
MoP&NR Ministry of Petroleum and Natural Resources
MOU Memorandum of Understanding
MP&NRs Ministry of Petroleum & Natural Resources
MT Motor Transport
MTBs Market Treasury Bills
NAB National Accountability Bureau
NADRA National Database and Registration Authority
NBP National Bank of Pakistan
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NESPAK National Engineering Services of Pakistan
NFML National Fertilizer Marketing Ltd
NFR Non Fuel Retail
NGO Non-Government Organization
NICL National Insurance Company Limited
NIPD&MC National Industrial Parks Development and Management Company
NIRC National Industrial Relations Commission
NJI New Jubilee Insurance
NLC National Logistic Cell
NSC National Security Council
OEM Original Equipment Manufacturer
OGDCL Oil and Gas Development Company Limited
OGRA Oil and Gas Regulatory Authority
OM Observation Memo
OSP Other Security Products
P&L Profit and Loss
PAC Public Accounts Committee
PACO Pakistan Automobile Corporation
Pak PWD Pakistan Public Works Department
PAO Principal Accounting Officer
PATLO Pakistan Army Technical Liaison Officer (POFs)
PAX Passenger
PBG Performance Bank Guarantee
PBG Performance Bank Guarantee
PBM Pakistan Bail-ul-Mal
PCA Petroleum Concession Agreement
PCESSDC Pakistan Chemical and Energy Sector Skill Development Company
PC-I Planning Commission –I
PDCs Peripheral Development Charges
PEC Pakistan Engineering Council
PEPAC Pakistan Environmental Planning and Architectural Consultants
(Pvt) Limited
PG&JDC Pakistan Gems and Jewellery Development Company
PHA Pakistan Housing Authority
PIAC Pakistan International Airlines Corporation

v
PICIC Pakistan Industrial Credit and Investment Corporation
PIDC Pakistan Industrial Development Corporation (Pvt.) Limited
PIM Pakistan Institute of Management
PKR Pak Rupee
PM Prime Minister
PNSC Pakistan National Shipping Corporation
POFIT Pakistan Ordnance Factory Institute of Technology
POFs Pakistan Ordnance Factories
POL Petrol, Oil and Lubricant
PPC Pakistan Penal Code
PPL Pakistan Petroleum Limited
PPM Policy and Procedure Manual
PPRA Public Procurement Regulatory Authority
PPRs Public Procurement Rules
PQA Port Qasim Authority
PRCL Pakistan Reinsurance Company Limited
PRI Pakistan Remittance Initiatives
PS Private Secretary
PSDP Public Sector Development Programme
PSEs Public Sector Enterprises
PSFCL Pakistan Steel Fabricating Company Limited
PSM Pakistan Steel Mills
PSOCL Pakistan State Oil Company Limited
PSPC Pakistan Security Printing Corporation
PUG Passing Unregistered Gas
R&D Research and Development
RBS Rebroadcasting Station
RECP Rice Export Corporation of Pakistan
RSD Ramp Service Division
SAM Special Asset Management (ZTBL+SME Bank)
SAP System Application Programme
SBFC Small Business Finance Corporation
SBP State Bank of Pakistan
SDA Special Deposit Account
SEC State Engineering Corporation
SECP Security Exchange Commission of Pakistan
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SLIC State Life Insurance Corporation of Pakistan
SMEDA Small and Medium Enterprises Development Authority
SMS Sale Meter Station (SNGPL)
SNGPL Sui Northern Gas Pipelines Limited
SNTD Short Notice Term Deposit
SOP Standard Operating Procedure
SPL Security Paper Limited
SPO Sales Promotion Officer
SRO Statutory Regulatory Order
SSGCL Sui Southern Gas Company Limited
TCP Trading Corporation of Pakistan
TDR Term Deposit Receipt
TIP Transparency International Pakistan
TT charges Telegraphic Transfer charges
TUSDEC Technology Upgradation and Skill Development Company
UAN Universal Access Number
UBL United Bank Limited
UFG Un-accounted For Gas
UO Un-official
USC Utility Stores Corporation of Pakistan (Pvt.) Limited
USD US Dollar
VSS Voluntary Separation Scheme
WIL Wah Industries Limited
WIP Work in Progress
WPPF Workers’ Profit Participation Fund
ZTBL Zarai Taraqiati Bank Limited

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 Preface
Articles 169 and 170 of the Constitution of the Islamic Republic of
Pakistan 1973, read with Sections 8 and 15 and other relevant provisions of the
Auditor-General’s (Functions, Powers and Terms and Conditions of Service)
Ordinance, 2001 require the Auditor-General of Pakistan to conduct audit of the
expenditure from the Federal Consolidated Fund, Public Account and that of
Government Commercial Undertakings and of any Authority or Body established
by the Federation.

This report is based on audit of the accounts of Public Sector Enterprises

of Government of Pakistan for the year 2012-13. The Audit Report also contains
audit observations of the previous financial years. The Directorates General
Commercial Audit and Evaluation, Lahore and Karachi conducted audit during
the period July 01, 2013 to November 15, 2013 on test check basis, with a view
to reporting significant findings to the relevant stakeholders. The main body of
the Audit Report includes only the systemic issues and audit findings carrying
value of Rs 1 million or more. Relatively less significant issues not considered
worth reporting to the PAC and the observations of less than Rs 1 million have
been listed in Annexure-1 (MFDAC). The audit observations listed in
Annexure-1 shall be pursued with the relevant Principal Accounting Officers of
the Ministries / Divisions at DAC level. In case where the PAO does not initiate
appropriate action, the audit observations will be brought to the notice of the
Public Accounts Committee through the next year’s Audit Report.

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 discussions in the Departmental Accounts Committee 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: (MUHAMMAD AKHTAR BULAND RANA)

Auditor-General of Pakistan

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x
 EXECUTIVE SUMMARY
Directorates General of Commercial Audit and Evaluation (DsG, CA&E)
Lahore and Karachi carry out audit and evaluation of Public Sector Enterprises
(PSEs) established by Federal Government which maintain their accounts on
commercial basis. Section 15 of the Auditor-General’s (Functions, Powers and
Terms and Conditions of Service) Ordinance, 2001 empowers the Auditor-
General of Pakistan to conduct audit of companies and corporations established
in the public sector. For this, DsG, CA&E have a human resource of 142 officers
and staff equivalent to 39,126 mandays for audit. The annual budget of both the
Directorates General for the year 2012-13 amounted to Rs 190.13 million. Out of
39,126 mandays, 34,906 were utilized for conducting of audit of Federal Public
Sector Enterprises by spending budget of Rs 144.45 million. This report contains
results of audit inspection and evaluation of financial performance of public
sector entities for the financial year 2012-13 conducted during the year 2013-14.

This report also contains comments on the annual audited accounts of 57

public sector enterprises (41 current and 16 arrear). However, comments on 56
organizations (Annexure-2) could not be included in this report as the concerned
management failed to submit their audited accounts by the prescribed date. Nine
organizations (Annexure-3) ceased their operational activities during the years
1986 to 2008. These are still under the process of liquidation/privatization.

a. Scope of Audit

There are 101 commercial entities of the Federal Government under the
jurisdiction of DsG, CA&E, Lahore and Karachi. These entities operate under the
administrative control of 27 Principal Accounting Officers (PAOs). As per Audit
Plan 2013-14, the DsG, CA&E, Lahore and Karachi audited the accounts
pertaining to year 2012-13 of 57 commercial entities against the planned 73
entities.

Out of total expenditure of the entities for the financial year 2012-13,
auditable expenditure under the jurisdiction of the DsG, CA&E, Lahore and
Karachi was Rs 889.57 billion covering 101 entities falling under 27 PAOs. Of
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this, the Directorates General audited the expenditure of Rs 798.13 billion which
in terms of percentage is 89.72% of auditable expenditure. The audit of receipts
of Rs 1,117.70 billion pertaining to these formations was also conducted.

b. Recoveries at the instance of audit

Recovery of Rs 44,908.51 million was pointed out in this report.

Recovery of Rs 14,380.64 million was effected during January, 2013 to January,
2014 including recoveries pertaining to pervious audit reports. An amount of
Rs 9.94 million was not in the notice of the executives before audit.
c. Audit Methodology

Audit planning was carried out and permanent files of auditee

organizations were maintained and consulted / updated for audit of the accounts
for the year 2012-13. Desk audit helped the auditors in understanding the
systems, procedures, environments and the auditee entity before starting field
activity. This greatly facilitated in the identification of high risk areas for audit
tests to be applied in the field. Audit was carried out on the basis of adequacy of
internal control system in the organization with specific emphasis on high value
items and inherent risk areas. Audit checks were applied keeping in view the
nature of transactions, current commercial accounting and best auditing practices
in Pakistan and relevant financial and operational manuals.

d. Audit Impact

Audit has contributed towards adding value to the control mechanism of

organizations where compliance was made on audit recommendations.

e. Comments on Internal Controls

Internal controls in any organization take the form of policies, procedures,

rules, regulations, monitoring mechanisms etc. These controls guard against
fraud, waste and inefficiency as well as ensure reliable and accurate operational
and financial information for intelligent decision making and prompt compliance
with institutional policies and applicable laws and regulations. Internal controls
are essential part of management’s efforts to achieve its objectives and goals.
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A number of internal control weaknesses were seen during the audit of Public
Sector Enterprises, of which a few are illustrated below:-

 Inventory Management

Inventory management was another area where certain organizations

exhibited loose control with respect to purchases, physical verification and
record keeping. Purchases were made without ascertaining the requirements
thus blocking capital, whereas obsolete inventories were not disposed of for
years.

 Acquisition of Human Resources

It was noticed that the Public Sector Enterprises were not observing
regulations for acquisition of human resources while making fresh
appointments, re-employment of retired personnel or appointment of
consultants.

 Receivables/Debt Management

Receivables management in almost all the organizations required immediate

attention. Trade debts were not being collected within the stipulated period
and a rising trend in receivables was noticed in a large number of
organizations audited. This adversely affected the liquidity position. Further,
the policy of loan sanctioning in public sector financial institutions was quite
liberal which resulted in bad debts. Post finance monitoring was also lacking
which minimized chances of recovery.

f. The key audit findings of the report;

i. Embezzlement of public money and fictitious payments amounting to

Rs 5,469.90 million in 8 cases1.
ii. PPRA Rules were violated in procurements worth Rs 357.18 million in 12
cases.2

1
Para 2.1.4.4., 2.1.4.8, 5.4.4.2, 6.3.4.5, 6.3.4.9, 6.6.4.1, 13.2.4.9, 13.4.4.4
2
Para 2.1.4.3, 2.1.4.6, 2.1.4.7, 2.1.4.9, 4.1.3.3, 4.5.4.2, 5.1.4.1, 5.2.4.7, 6.4.4.8, 6.3.4.10, 6.3.4.12, 15.1.4.1
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 iii. Overpayment/recovery pointed out in 08 cases - Rs 104.68 million.3
iv. There were 03 cases pertaining to non protection of assets involving an
amount of Rs 7.75 million.4
v. There were 13 cases of irregular appointments having financial impact of
Rs 76.30 million.5
vi. There were 03 cases amounting to Rs 268.15 million pertaining to
blockage of funds.6
vii. Non-Production of record in 3 cases. 7
viii. Irregular payment of bonus amounting to Rs 16.49 million in 3 cases.8
ix. Irregular/doubtful investment amounting to Rs 122.61 million in 3 cases9
x. Irregular payment of insurance claims Rs 2,368.61 million in 3 cases.10
xi. Irregular expenditure on acquiring/maintaining property amounting to
Rs 220.67 million in 3 cases.11
xii. Unlawful encroachment of SBP land amounting to Rs 102.66 million in 2
cases.12

The main body of the Audit Report includes audit findings carrying value
of rupees one million or above. Relatively less significant issues are listed in the
Annexure-I of the Audit Report. The audit observations in the Annexure-I shall
be pursued with the Principal Accounting Officers of the relevant
Ministries/Divisions at DAC level.

g. Recommendations

The executives (Principal Accounting Officers) need to take necessary

steps to evaluate and strengthen the management, budgeting and institute
accounting controls to:-

3
Para 5.2.4.6, 6.1.3.4, 6.1.3.6, 6.1.3.8, 6.5.4.3, 8.10.4.2, 8.21.4.4, 14.2.4.1
4
Para 6.5.4.5, 8.12.4.8, 8.13.4.2
5
Para 2.1.4.11, 2.2.3.2, 3.2.4.3, 6.7.4.3, 6.7.4.2, 8.1.4.1, 8.1.4.2, 8.11.4.7, 8.18.4.3, 8.21.4.7,
13.2.4.5, 13.2.4.8, 16.1.3.3
6
Para 4.5.4.3, 11.1.4.1, 11.1.4.6
7
Para 4.1.3.2, 13.4.4.2, 16.4.3.2
8
Para 4.4.4.1, 6.1.3.7, 8.4.4.2
9
Para 6.1.3.3, 6.1.3.5, 13.2.4.7
10
Para 6.1.3.10, 13.1.4.1, 16.3.4.3
11
Para 6.3.4.3, 6.3.4.6, 16.4.3.6
12
Para 6.3.4.4, 6.3.4.5
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i. ensure recovery against overpayments (PBC & OGRA) ;
ii. ensure timely recovery of sundry debts, loans and advances (SME Bank,
ZTBL and HBFC);
iii. streamline the recruitment policies to protect the inalienable rights of
every citizen, as provided in the Constitution (SME Bank, NESPAK,
PIAC, PSO, GPA and OGDCL);
iv. ensure compliance with PPRA Rules 2004 (POFs, NICL, KS&EW and
SBP);
v. improve financial health of enterprises running in losses (PCP, SME
Bank, HMC, HEC & OEC);
vi. pursue legal cases actively (ZTBL) ;
vii. optimize operational capacity and streamline inventory of stores/spares to
achieve economy, efficiency and effectiveness.
viii. ensure provision of auditable record for ascertaining transparency.
ix. arrange timely submission of annual audited accounts to Audit
(Ref. Annexure-2);
x. expedite liquidation of closed enterprises to avoid recurring expenses and
deterioration of their assets (Ref. Annexure – 3).

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SUMMARY TABLES & CHARTS

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 SUMMARY TABLES & CHARTS
Table 1: Audit Work Statistics
(Rs in million)
S. No. Description No. Budget

1 Total PAOs in Audit Jurisdiction 27 -

2 Total Commercial Entities in Audit Jurisdiction 101 2,100,265.05
3 Total PAOs Audited 22 -
4 Total Commercial Entities Audited 56 1,915,829.59
5 Audit Inspection Reports 56 1,915,829.59
6 Special Audit Reports - -
7 Performance Audit Reports - -
8 Other Reports - -

Table 2: Audit observations regarding Financial Management

(Rs in million)
S. No. Description Monetary value of audit
observations
1. Unsound asset management 11,317.79
2. Weak financial management 13,601.14
3. Weak internal controls relating to financial management 269,303.84
4. Others 6,437.76
Total 300,660.53

Table 3: Outcome Statistics

(Rs in million)
Expenditure
Sr. on acquiring Civil Total current
Description Receipts Others Total last year
No. Physical Assets Works year
(Procurement)
1. Outlays 66,487.28 42,213.90 1,117,706.33 689,422.08 1,915,829.59 2,136,855.87
Audited
2. Monetary 1,363.98 1,840.71 273,213.76 24,242.08 300,660.53 24,933.65
value of audit
observations
3. Recoveries - - - - 44,908.51 1,906.61
Pointed out at
the instance of
Audit
4. Recoveries - - - - 44,908.51 1,906.61
Accepted /
Established at
the instance of
Audit
5. Recoveries - - - - 14,380.64 1,552.99
Realized at the
instance of
Audit.

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Table 4: Table of Irregularities pointed out
(Rs in million)
Monetary value
S. of audit
No. Description observations
1. Violation of rules and regulations and violation of principle of 264,794.21
propriety and probity in public operations.
2. Reported cases of fraud, embezzlement, thefts and misuse of public 5,570.24
resources.
3. Accounting Errors (accounting policy departure from IAS, -
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 statements.
4. Weaknesses of internal control systems. 22,493.87
5. Recoveries and overpayments, representing cases of established 4,968.29
overpayment or misappropriations of public money.
6. Non – production of record. -
7. Others, including cases of accidents, negligence etc. 2,865.90
Total 300,692.52

*This amount represents the recoveries and overpayments pointed out by audit
whereas the figures shown at table-3 sr-4 column-7 represent only the cases
where recovery has been started/made.

Table 5: Cost-Benefit
(Rs in million)
S. 2013-14 2012-13 2011-12
No. Description
1. Outlays Audited 1,915,829.59 2,136,855.87 3,639,864.224
2. Expenditure on Audit 144.45 110.72 102.007
3. Recoveries realized at the instance 14,380.64 1,552.99 592.162
of Audit
Cost-Benefit Ratio 1:99.55 1 : 14.03 1.0:5.8

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