AUDIT REPORT ON THE ACCOUNTS OF ASSISTANT DIRECTOR LOCAL GOVERNMENT, ELECTION & RURAL DEVELOPMENT DEPARTMENT AND SELECTED UNION COUNCILS DISTRICT KOHAT KHYBER PAKHTUNKHWA AUDIT YEAR 2015-16 AUDITOR GENERAL OF PAKISTAN i TABLE OF CONTENTS 1 ABBREVIATION AND ACRONYMS i 2 PREFACE ii 3 EXECUTIVE SUMMARY iii 4 SUMMARY TABLES AND CHARTS vii Table 1: Audit Works Statistics vii Table 2: Audit Observations Classified by Categories vii Table 3: Outcome Statistics viii Table 4: Irregularities Pointed Out viii Table 5: Cost Benefit ix 5 CHAPTER 1 1 1.1 AD LGE & RDD and selected Union Councils 1 1.1.1 Introduction 1 1.1.2 Comments on Budget and Accounts (Variance Analysis) 1 1.1.3 Brief Comments on the Status of Compliance 2 ii 1.2 Audit Paras 3 6 Annexures 7 iii ABBREVIATIONS AND ACRONYMS AD LG&RDD Assistant Director Local Government & Rural Development Department AP Advance Para APRs Actual Payee Receipts DAC Departmental Accounts Committee DDAC District Development Advisory Committee DDO Drawing and Disbursing Officer GFR General Financial Rules MFDAC Memorandum for Departmental Accounts Committee PAC Public Accounts Committee PAO Principal Accounting Officer RDA Regional Directorate of Audit SIDB Small Industrial Development Board UAs Union Administrations UCs Union Councils iv Preface Articles 169 and 170 of the Constitution of the Islamic Republic of Pakistan, 1973 read with Sections-8 and 12 of the Auditor-General (Functions, Powers and Terms and Conditions of Service) Ordinance, 2001 and Section 168 of Local Government Act 2012, require the Auditor-General of Pakistan to conduct audit of the receipts and expenditure of Local Fund of AD LG&RDD. The report is based on audit of the accounts of AD LG&RDD, District Kohat for the Financial Year 2014-15. The Directorate General of Audit, District Governments, Khyber Pakhtunkhwa, Peshawar conducted audit on test check basis during 2015-16 with a view to reporting significant findings to the relevant stakeholders. The main body of the Audit Report includes only significant systemic issues and audit findings. Relatively less significant issues are listed in the annexure-1 of the Audit Report. The Audit Observations listed in annexure-1 shall be pursued with the Principal Accounting Officer at the DAC level and in all cases where the PAO does not initiate appropriate action, the Audit observation will be brought to the notice of 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. The observations included in this Report have been finalized in the light of written replies of the Departments. DAC meetings could not be convened despite repeated requests. The Audit Report is submitted to the Governor of Khyber Pakhtunkhwa in pursuance of Article 171 of the Constitution of the Islamic Republic of Pakistan, 1973 read with Section 115 of Khyber Pakhtunkhwa Local Government Ordinance, 2001 (as amended) to be laid before appropriate legislative forum. Dated: (Rana Assad Amin) Islamabad Auditor General of Pakistan v EXECUTIVE SUMMARY The Directorate General of Audit, District Governments, Khyber Pakhtunkhwa, Peshawar, a Field Audit Office of the Auditor General of Pakistan is responsible to conduct the audit of all District Governments in Khyber Pakhtunkhwa, Assistant Director Local Government & Rural Development. Its Regional Directorate of Audit Kohat has audit jurisdiction of District Governments, AD Local Government and Rural Development and UAs of three Districts i.e. Kohat, Karak and Hangu. The Regional Directorate has a human resource of 07 officers and staff, constituting 1953 man days and a budget of about Rs 7.764 million was allocated during 2014-15. It has the mandate to conduct financial attest audit, audit of sanctions, audit of compliance with authority and audit of receipts as well as the performance audit of entities, projects and programs. Accordingly Regional Director Audit Kohat carried out audit of the accounts of AD LG&RDD Kohat for the Financial Year 2014-15 and the findings included in the Audit Report. Assistant Director Local Government & Rural Development Department District Kohat perform their functions under Khyber Pakhtunkhwa Local Government Act 2012. Administrative Secretary i.e. Secretary Local Government and Rural Development Department, Khyber Pakhtunkhwa is the Principal Accounting Officer for these local bodies. According to financial provisions of the Act, the Secretary Local Government and Rural Development Department, Khyber Pakhtunkhwa authorizes the Annual Budget for these local bodies in the form of budgetary grants. Assistant Director LG&RDD and Union Administrations Kohat comprises of Assistant Director as administrator and Union Secretaries. a. Scope of audit There are 32 Union Councils in two (2) Tehsils of District Kohat out of which the accounts of 10 Union Councils were examined in detail. These Union vi Councils were selected for detail audit by excluding the last year audited entities, on the basis of random sample of seven UCs from Tehsil Kohat and three from Tehsil Lachi, keeping in view the available man days. S. # Tehsil Total No. of UCs No. of UCs No. of UCs Audited Audited 1 Kohat 21 7 6 Last year This year 2 Lachi 11 3 4 Out of the total expenditure of the Assistant Director Local Government & Rural Development Department and 10 UCs, District Kohat, for the Financial Year 2014-15, the auditable expenditure under the jurisdiction of RDA was Rs 21.003 million. Out of this, RDA Kohat audited an expenditure of Rs 16.802 million on test check basis which, in terms of percentage, is 80% of auditable expenditure. The receipts of 10 UCs, District Kohat for the Financial Year 2014-15, were Rs 0.123 million. Out of this, RDA Kohat audited receipts of Rs 0.123 million which, in terms of percentage, was 100% of auditable receipts. The total expenditure and receipts of Assistant Director Local Government & Rural Development Department and UCs, District Hangu, for the Financial Year 2014-15 were Rs 21.126 million. Out of this, RDA Kohat audited the expenditure and receipts of Rs 16.925 million. b. Recoveries at the instance of audit Recovery of Rs 0.011 million was pointed out during the audit. However, no recoveries were affected till the finalization of this report. c. Audit Methodology Audit was conducted after understanding the business processes of Assistant Director Local Government Office and Union Councils with respect to their functions, control structure and key controls. This helped auditors in understanding the systems, procedures, environment, and the audited entity vii before starting the audit. Audit used desk audit techniques for analysis of compiled data and review of actual vouchers with other supporting documents and records called for scrutiny and substantive testing in the Regional Directorate of Audit Kohat. d. Audit Impact Audit pointed out various irregularities of serious nature to the management. However, no impact was visible as the irregularities could not come to the light in the proper forum i. e DAC. e. Comments on Internal Control and Internal Audit department The purpose of internal control system is to ensure effective operation of an organization. It consists of measures employed by the management to achieve objectives, safeguard assets, ensure accuracy, timeliness and reliability of financial and accounting information for decision making. One of the basic component of Internal Control System, as envisaged under Para 13 of GFR Volume-I, is Internal Audit which was not prevalent in AD LG&RDD. Neither rules for internal audit have been framed nor internal audit report as required was provided to audit. f. Key Audit Findings i. Irregularities/Non-Compliance of Rs 0.898 million were noted in one case.1 ii. Weak Internal Control of Rs 5.669 million was noted in two cases.2 Audit paras for the audit year 2015-16 involving procedural violations including internal control weaknesses and irregularities which were not considered worth reporting to the PAC were included in Annex-1 (MFDAC). 1 Para: 1.2.1.1 2 Para: 1.2..2.1 & 1.2.2.2 viii g. Recommendations i. Disciplinary actions need to be taken to stop the practice of violation of the rules and regulations in spending the public money. ii. All sectors of AD LG&RDD need to strengthen internal control i.e. financial, managerial, operational, administrative and accounting controls etc to ensure that reported lapses are preempted and fair value for money is obtained from public spending. ix SUMMARY TABLES AND CHARTS Table 1: Audit Work Statistics (Rs in million) S. No Description No. Budget 1 Total Entities (PAO) in Audit Jurisdiction 01 21.003 2 Total formations in audit jurisdiction 32 21.003 3 Total Entities (PAO) Audited 01 21.003 4 Total formations Audited 11 16.802 5 Audit and Inspection Reports 02 16.802 6 Special Audit Reports -- -- 7 Performance Audit Reports -- -- 8 Other Reports (relating to AD LG&RDD) -- -- Table 2: Audit observations Classified by Categories (Rs in million) S. No Amount placed under Description Audit Observation 1 Unsound asset management -- 2 Weak financial management 0.898 3 Weak Internal controls relating to financial management 5.669 4 Others -- Total 6.567 x Table 3: Outcome Statistics (Rs in million) Expenditure on Acquiring Total for Physical Total for S. No Description Civil the year Receipts Others the year Assets Works 2013-14 Procurement 2014-15 1 Outlays Audited - - 0.123 16.679 16.802 12.06 Amount Placed under 2 Audit Observation - - - 6.567 6.567 8.007 /Irregularities of Audit Recoveries Pointed Out 3 - - - 0.011 0.011 0.072 at the instance of Audit Recoveries Accepted 4 /Established at the - - - - - - instance of Audit Recoveries Realized at 5 - - - - - - the instance of Audit Note: The outcome figures reported for the year 2013-14 pertain to the Ten (10) Union Councils audited last year.