Report of the Public Accounts Committee to the

Sixth Session of the Second Parliament

(23-24 November, 2015)

Committee Members:

1. Hon. Pema Dakpa (NC MP-Zhemgang) Chairperson; 2. Hon. Dophu Dukpa, (NA MP-Kabji-Talo) Dy. Chairperson; 3. Hon. Choida Jamtsho (NA MP-Nganglam) Member 4. Hon. Karma Tenzin (NA MP-Wamrong) Member; 5. Hon. Tashi Dorji (NC MP-Wangdue phodrang) Member.

TABLE OF CONTENTS

INTRODUCTION...... 1

CHAPTER I: SYNTHESIS OF ANNUAL AUDIT REPORT 2014 ...... 1

CHAPTER II: SYNTHESIS OF REVIEW REPORTS OF AAR 2009-2013...... 13

CHAPTER III: STATUS OF CASES FORWARDED TO ANTI- CORRUPTION

COMMISSION (ACC) ...... 17

CHAPTER IV: PAC’S BUSINESS ...... 20

CONCLUSION ...... 22

ANNEXURE ...... 22

PUBLIC ACCOUNTS COMMITTEE REPORT TO THE SIXTH SESSION OF THE SECOND PARLIAMENT

INTRODUCTION

The Public Accounts Committee (PAC) is mandated to review and report on the Annual Audit Report (AAR) to Parliament for its consideration or any other reports presented by the Auditor General as enshrined in Article 25(6) of the Constitution of the Kingdom of . The committee functions as per the Rules of Procedures of Public Accounts Committee 2015.

The committee has examined and evaluated the financial audit reports, conducted several meetings and public hearings and completed synthesized report for presentation to the 6th Session of the Second Parliament of Bhutan for information and deliberation. The main components of the report are Synthesized Annual Audit Report 2014, Synthesized Review Report of Annual Audit Report 2009-13, Status of cases forwarded to Anti Corruption Commission (ACC), Other Issues, PAC Observations and PAC Recommendations.

CHAPTER I: SYNTHESIS OF ANNUAL AUDIT REPORT 2014

The content of the Annual Audit Report 2014 are accomplishments of the Royal Audit Authority (RAA), summary of audit findings, certification of annual financial statements, detailed audit findings, audit report on the government payroll and provident fund, review of 10th Five Year Plan, recommendations, auditor’s report on the audit of accounts and operation, glossary of terms.

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Through rigorous follow up, RAA has recovered Nu. 115.628 million from the pending irregularities where the recoveries are 48% from Ministries, 27% from Dzongkhags and Gewogs, 24% from Autonomous Bodies and the rest from Corporation and Financial Institutes. The RAA issued the total of 692 audit reports comprising of 599 financial audits, 84 compliance audits, 3 performance audits, 6 special audits. The RAA endorsed and forwarded 12 audit reports containing 22 cases with elements of financial irregularities to the Anti Corruption Commission considering the possible existence of element of fraud and corruption.

The total unresolved irregularity reflected in the report is Nu. 634.313 million pertaining to 7 Ministries (Nu. 131.762 million), 13 Dzongkhags (Nu. 27.587 million), 12 Gewogs of seven Dzongkhags (Nu. 2.326 million), 8 Autonomous Bodies (Nu. 239.491 million), 7 Corporations (Nu.202.25 million), 5 Financial Institutions (Nu. 30.676 million) and one Political Party (Nu. 0.221 million) as shown in Table 1.

Table 1. Irregularities by Agency Sl. No. Agency Irregularities Amount( Nu in million) 1 Ministry 131.762 2 Dzongkhags 27.587 3 Gewogs 2.326 4 Autonomous Agencies 239.491 5 Corporations 202.25 6 Financial Institutes 30.676 7 Political Parties 0.221 Total 634.313 a) Seven Ministries reflecting irregularities are: 1. Ministry of Information and Communications (Nu. 85. 688 million); 2. Ministry of Finance (Nu. 18.403 million); 3. Ministry of Foreign Affairs (Nu. 12.856 million);

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4. Ministry of Health (Nu. 9.345 million); 5. Ministry of Agriculture and Forests (Nu. 4.601 million); 6. Ministry of Works and Human Settlement (Nu. 0.679 million); and 7. Ministry of Economic Affairs (Nu. 0.210 million). b) Thirteen Dzongkhags reflecting irregularities are: 1. Sarpang Dzongkhag (Nu.16.520 million); 2. Chhukha Dzongkhag (Nu.2.181 million); 3. Trashiyangtse Dzongkhag (Nu.1.748 million); 4. Dagana Dzongkhag (Nu. 1.663 million); 5. Trashigang Dzongkhag (Nu. 1.174 million); 6. Gasa Dzongkhag (Nu. 0.824 million); 7. Trongsa Dzongkhag (Nu. 0.729 million); 8. Tsirang Dzongkhag (Nu. 0.725 million); 9. Monggar Dzongkhag (Nu. 0.710 million); 10. Samtse Dzongkhag (Nu.0.634 million); 11. Samdrupjongkhar Dzongkhag( Nu. 0.290 million); 12. Thimphu Dzongkhag( Nu. 0.210 million); and 13. Wangduephodrang Dzongkhag( Nu. 0.179 million). c) Twelve Gewogs reflecting irregularities are: 1. Lochina Gewog (Nu. 0.598 million), Darla Gewog (Nu.0.259 million), (Nu. 0.186 million), (Nu. 0.045 million) and Gewog (Nu.0.045 million) under Chhukha Dzongkhag; 2. (Nu. 0.200 million) under Gasa Dzongkhag; 3. Gakiling Gewog (Nu.0.710 million) under Haa Dzongkhag; 4. (Nu. 0.232 million) under Paro Dzongkhag; 5. Dzomi Gewog (Nu.0.051 million) under Punakha Dzongkhag; 6. Mendrelgang and Sergithang Gewogs under Tsirang Dzongkhag; and

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7. Gasel Tshogongma Gewog under Wangduephodrang Dzongkhag. d) Eight Autonomous Bodies reflecting irregularities are: 1. Bhutan Education City Secretariat (Nu. 110.219 million); 2. Royal University of Bhutan (Nu.68.544 million); 3. National Land Commission (Nu. 35.827 million); 4. Thimphu Administration (Nu. 21.755 million); 5. Phuntsoling Thromde Administration (Nu.1.253 million); 6. Tourism Council of Bhutan (Nu. 1.203 million); 7. Election Commission of Bhutan (Nu. 0.164 million); and 8. Judiciary e) Seven Corporations reflecting irregularities are: 1. Dungsam Cement Corporation Limited (Nu. 179.726 million); 2. DHI-Infra Limited (Nu. 12.342 million); 3. State Trading Corporation of Bhutan Limited (Nu. 5.510 million); 4. Food Corporation of Bhutan Limited (Nu. 4.153 million); 5. Bhutan Postal Corporation Limited (Nu. 0.390 million); 6. Bhutan Power Corporation Limited (Nu. 0.129 million); and 7. Natural Resources Development Corporation Limited. f) Five Financial Institutes reflecting irregularities are: 1. Bhutan National Bank Limited (Nu. 29.927 million); 2. National Pension and Provident Fund (Nu. 0.449 million); 3. Bhutan Development Bank Limited (Nu. 0.300 million); 4. Bank of Bhutan Limited; and 5. Royal Monetary Authority of Bhutan.

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The one political party reflecting irregularities is Druk Phuentsum Tshogpa (Nu. 221 million).

Among the budgetary agencies, the highest amount of irregularities is reported under Autonomous Agency with Nu. 239.491 million followed by Ministry of Information and Communication with 85.668 million and Dzongkhags with Nu. 27.587 million. Under the non budgetary agencies, Dungsam Cement Corporation Limited has the largest amount of reported irregularities amounting Nu. 179.726 million representing 77.22% followed by Bhutan National Bank Limited with irregularities of Nu. 29.927 million.

For convenience, the irregularities have been classified as Fraud, Corruption and Embezzlement;

Mismanagement;

Violation of Laws and Rules; and

Shortfalls, Lapses and Deficiencies.

As shown in Chart 1, the highest amount of irregularities was Nu. 263.888 million reflected under Violation of Laws and Rules category. The least amount of irregularities of Nu. 98.918 million was reflected under the Fraud, Corruption and Embezzlement category. Under the Shortfalls, Lapses and Deficiencies category, the amount is Nu. 136.458 million followed by Nu. 135.049 million under Mismanagement category. The irregularities are a result of a lack of due diligence and competence, poor supervision, monitoring and internal control, poor enforcement of rules and regulations and finally non regulations of advances.

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Chart 1. Irregularities by category

Category wise irregularities 263.888 300 250

200 135.049 136.458 150 98.918 100 50 Amoun( Nuin Amoun(million) 0 Fraud, Corruption Mismanagement Violation of Lawa Shortfalls, Lapses and and Rules and Deficiencies Embezzlement Irregularities Category

Considering the magnitude of irregularities of Ministries, Autonomous agencies and Corporations, the amount of irregularities resolved was further analyzed. As shown in the Table 2, it was found that the 55.12% of the irregularities of the Autonomous agencies have been resolved, 16.06% by Corporations and 11.42% by Ministries. Autonomous agencies such as Bhutan Education City and National Land Commission have resolved all or most of the irregularities, thereby representing a higher rate of recovery.

Table 2. Resolved irregularities AAR 2014 as of 30th September 2015

Irregularities Amount Resolved Amount Percentage Agencies ( Nu. in million) ( Nu. in million)

Ministry 131.762 15.049 11.42

Autonomous Agencies 239.491 132.00 55.12

Corporations 202.250 32.473 16.06

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The general recommendations of RAA are: 1. Need to institute strong control mechanism to facilitate timely surrender of closing cash balances to the Department of Public Accounts (DPA);

2. Ensure robustness of Public Expenditure Management System through appropriate controls and coordination mechanisms; and

3. Ensure stick enforcement of rules and regulations through appropriate supervision and monitoring mechanisms.

1. Prominent Issues

1.1 Basis of “Qualified” Audit Opinion on the Annual Financial Statement of the Royal Government of Bhutan for the Financial Year ended 30th June 2014

The RAA found sufficient audit evidences to provide the basis for its qualified audit opinion as: a) There were mismatches between Employees’ contribution (6.a) reported under the Receipts and Payments statements of the budgetary agencies and monthly PF schedules generated from Payroll module of the PEMS. Further, inconsistent number of employees under monthly PF schedules was observed, which apparently indicated circumvention of accounting module wherein in lieu of using payroll module, the budgetary agencies had used Accounts Module to prepare monthly salary. Pending review and reconciliation of these differences, the exact extent of impact in these accounts cannot be ascertained.

b) The Bank Reconciliation Statement for the year under review indicated that the amount withdrawn reported as per cash book was less than that of the amount reported as per Bank to the tune of Nu. 1,113,410,385.19. Pending review and confirmation of such difference in the PEMS and with respective budgetary

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agencies, the exact extent of impact of which in these accounts is not ascertainable.

PAC’s Observations

While developing PEMS, the payroll module was not developed but was later incorporated. The mismatch between Employees contribution reported under "receipts" and "payments" and the inconsistent number of employees are primarily due to using different module such as payroll module and accounts module by different government agencies. For example, the release by Finance Ministry to Royal Bhutan Police is out of the payroll system although the contribution is made to NPPF. This is also due to duplication of employee identity and failure to incorporate last pay certificate (LPC). The MoF, RCSC and NPPF are working on it to rectify the issue.

The differences in the Bank Reconciliation Statements for the year to the tune of Nu.1,113,410,385.19 was mainly due to the bank statement submitted by BOB that had a huge closing balance while the actual amount released to Department of Road, Zhemgang amounted Nu.272,410,167.28.

PAC’s Recommendation 1

The MoF in future must take necessary measures to avoid the occurrence of such lapses in the Annual Financial Statement.

1.2 Payment of Children Education Allowance to the staff of Royal Bhutan Embassies. The RAA found that Royal Bhutan Consulate, Kolkata, Royal Bhutan Embassy, Brussels and Permanent Mission of Bhutan to the United Nations, Geneva had made inadmissible payment of Nu. 0.405 million. Similarly, in AAR 2013, the Royal Bhutan Embassies in New Delhi and Dhaka, Permanent Mission of Bhutan (PMB) in Geneva and the Royal

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Bhutan Consulate, Kolkata had made inadmissible payment of Nu. 1.933 million. Also in AAR 2011, the Royal Bhutanese Embassy in Bangkok made inadmissible payment of Nu. 1.443 million. The total amount of Nu. 3.781 million was inadmissible as per Foreign Service Rules and Regulation 2000 since such an allowance is payable only if the Children are not in receipt of free education either in Bhutan or abroad.

During PAC hearing on 4th November 2015, The Hon’ble Secretary, Ministry of Foreign Affairs mentioned that they had been receiving the allowance since 1999 and from 2009 the RAA started objecting it. During the hearing the officials from the Ministry of Foreign Affairs stated the following:

Many of the countries where the Royal Government has diplomatic posts do not have English medium Public Schools. There are private English medium schools and our diplomats are not able to send their children due to exorbitant fees. Our diplomats are, therefore, compelled to keep their children in Bhutan either in public or private schools. It is also important for the children to continue to learn . As a result, diplomats have to maintain two households – one at the place of posting and another in Bhutan, which is generally run by the spouse. Besides, the extra expenses separation of families is a hard ship that diplomats have to endure. The CEA that is being paid to our diplomats is very small compared to what is being paid by other countries to their diplomats. Many countries in South Asia pay their diplomats 70%-75% of the tuition fees for education in private schools in the places of posting. The Foreign Service Rules and Regulations which includes the entitlements were last revised in 2002 and attempts to revise the rules were unsuccessful in spite of the advice of RAA. However, a tripartite exercise is now underway among the MoFA, MoF and the Royal Civil Service Commission (RCSC) which is expected to bring clarity to the rules.

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PAC’s Observations

The FSER specifically stipulates that Children Education Allowance (CEA) shall be payable only if the children are not in receipt of free education either in Bhutan or abroad.

The 3rd Session of the Second Parliament recommended that the concerned Embassies repay the allowance immediately and take necessary administrative actions against the concerned officials. Despite the recommendations of the Parliament neither recovery has been made nor has administrative action been taken against the concerned officials.

Although there is clarity in the rule, the RAA also feels that there is a practical problem in the implementation, as some expenditure is still incurred even if the children of diplomats working abroad were availing free education in Bhutan.

However, RBE Bangkok, PMB New York and PMB Geneva had stopped paying CEA for the children of diplomats studying in the government schools in Bhutan. RBE Kuwait, Dhaka and Brussels are still paying CEA, but Kuwait and Dhaka would stop paying CEA from November 2015 while Brussels would stop the payment from December 2015. The Royal Bhutan Consulate in Kolkota is still paying CEA and has no mention to stop paying.

The FSER has not been revised since 2002 even though the Bhutan Civil Service Rules (BCSR) under Chapter 17, Clause 17.7.1 requires that the Ministry of Foreign Affairs in consultation with the Ministry of Finance and the RCSC carry out a periodic review of the FSER every three years.

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PAC’s Recommendation 2

The MoFA together with the MoF and the RCSC should revise the FSER immediately. The payment of CEA for children in receipt of free education either in Bhutan or abroad should be stopped till the FSER is revised.

1.3 Advance and excess payment

The irregularities classified under Violation of Laws and Rules and Shortfalls, Lapses and Deficiencies amount Nu. 400.346 million. It is dominated by excess payments and advances to officials and suppliers by the agencies. Some of the significant irregularities across the agencies are as:

Excess computation of payable amount for earth work excavattion over areas due to flaws in the analysis rate (Nu. 3.579 million) by the Ministry of Information and Communications; Outstanding advances against various staff and officials (Nu.7.839 million) by the Ministry of Finance; Outstanding advances against various officials (Nu.0.682 million) by Ministry of Foreign Affairs; Procurement of various medicines at higher rates from other forms than the lowest evaluated rate resulting into excess payment (Nu 9.345 million) by Ministry of Health; Outstanding advances against various staff (Nu. 3.346 million) by the Ministry of Agriculture and Forests; The excess payment to contractor for various construction work (Nu. 0.507 million) by Chhukha Dzongkhag; Excess payment to contractor for the construction of Science Laboratory at Daga Lower Secondary School (Nu.0.313 million) by Dagana Dzongkhag;

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Excess payment to contractor for traditional Debri painting for Mithrup Lhakhag and Kague Lhakhag (Nu. 824 million) by Gasa Dzongkhag; Outstanding advances against various employees (Nu.0639 million) by Trongsa Dzongkhag; Excess payment to the contractor for the construction of farm road and bailey bridge (Nu.598 million) by Lokchina Gewog under Chhukha Dzongkhag; Excess and inadmissible payment of hire charges and spare parts for construction of Bemphu farm road (Nu. 0111 million) by Naja Gewog under Paro Dzongkhag; Overpayment of supervision fees and accounts (Nu. 19.899 million) by Royal University of Bhutan; Outstanding advances against contractors and Bhutan Power Corporation Limited (Nu.3.914) by Thimphu Thromde; Outstanding advances against tour operators (Nu.0.501 million) by Tourism Council of Bhutan; and Irregularities in rate analysis of items of works resulting excess payment (Nu.197.082 million) by Dungsam Cement Corporation Limited.

PAC’s Observations

The practice of paying advances to officials, suppliers and contractors is common in most agencies and not liquidated by the end of the financial year. There are also instances of excess and inadmissible payment to suppliers and contractors arising from irregularities in rate analysis of items and works. The possible causes are poor enforcement of rules and regulations, lack of supervision and monitoring.

PAC’s Recommendations 3

The concerned agencies have to strictly follow the financial rules and regulations and RAA has to enforce the accountability fixation to the immediate supervisors.

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1.4 Common lapses and deficiencies in the implementation of the 10th Five Year Plan (FYP) activities by the Dzongkhags RAA reviewed the implementation of the 10 FYP activities in 14 Dzongkhags and observed that non execution, delays and deferment of planned activities; wasteful and underutilization of the facilities and infrastructure as the common lapses and deficiencies.

It was reported that around 120 planned activities were not executed, delayed or deferred. These include the construction of farm roads, bridges, schools and health buildings. Further, 34 facilities and infrastructures were found to be wasteful and underutilized. The facilities and infrastructure include farm road, agriculture and drinking water facilities, community information centers and office buildings.

PAC’s Observations

Most of these lapses and deficiencies are due to lack of proper need analysis and consultation with stakeholder, preliminary and feasibility studies, coordination amongst the relevant implementing agencies, monitoring and evaluation, and unrealistic budgeting.

PAC’s Recommendations 4

The government should strictly monitor the implementation of the planned activities in the Dzongkhags and ensure that such lapses and deficiencies are not repeated.

CHAPTER II: SYNTHESIS OF REVIEW REPORTS OF AAR 2009-2013

From the review reports of AAR 2009 to 2013, the total unresolved irregularities stands at Nu. 612.369 million. The amount of resolved irregularities is Nu. 53.417 (8.02%) only. The highest unresolved amount is from the Ministries with an amount of Nu. 545.053

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million followed by Corporations and Financial Institutions with an amount of Nu. 48.486 million.

Table 3. Agency wise resolved and unresolved irregularities of AAR 2009 to 2013

Resolved irregularities as on 30th Sept 2015 Agency AAR AAR AAR AAR AAR Total 2009 2010 2011 2012 2013

Ministries 0.000 16.176 10.955 3.384 19.895 50.410

Dzongkhags 0.700 0.090 1.540 0.000 0.000 2.330

Gewogs 0.000 0.000 0.000 0.000 0.000 0.000

Autonomous Agencies 0.000 0.000 0.037 0.000 0.154 0.191

Corporations and Financial 0.000 0.000 0.000 0.000 0.286 0.286 Institutions

Non-Governmental 0.000 0.000 0.000 0.200 0.000 0.200 Organizations

Total 0.700 16.266 12.532 3.584 20.335 53.417

Unresolved irregularities as on 30th Sept 2015 Ministries 3.249 70.036 250.265 156.181 65.322 545.053

Dzongkhags 0.000 0.307 0.576 0.802 5.360 7.045

Gewogs 0.042 0.000 0.021 0.220 4.619 4.902

Autonomous Agencies 0.000 0.000 1.357 1.656 0.483 3.496

Corporations and Financial 0.000 0.000 41.357 4.251 2.878 48.486 Institutions

Non-Governmental 0.000 0.000 0.000 0.000 3.387 3.387 Organizations

Total 3.291 70.343 293.576 163.11 82.049 612.369

Since the highest unresolved irregularities were under Ministries, Corporations and Financial Institutions, a break up analysis was carried out. Amongst the Ministries, Ministry of Foreign Affairs has the highest irregularities amounting to Nu. 196.23 million

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followed by Ministry of Information and Communications with Nu. 173.63 million (Table 4). Amongst the Corporations and Financial Institutions, Penden Cement Authority Limited has the highest irregularity with Nu. 45.576 million.

Table 4. Unresolved Irregularities by Ministry, Corporation and Financial Institutions, AAR 2009 to 2013

Sl. Ministry AAR AAR AAR AAR AAR Total No. 2009 2010 2011 2012 2013

1 Ministry of Labour and Human 3.249 0.000 0.000 3.295 5.043 11.587 Resources

2 Ministry of Health 0.000 67.282 0.000 8.695 0.000 75.977

3 Ministry of Finance 0.000 0.363 0.000 7.801 0.034 8.198

4 Ministry of Foreign Affairs 0.000 2.391 190.821 0.733 2.285 196.23

5 Ministry of information and 0.000 0.000 59.026 114.142 0.462 173.63 communications

6 Ministry of Agriculture and Forests 0.000 0.000 0.403 0.289 0.000 0.692

7 Ministry of Economic Affairs 0.000 0.000 0.015 0.513 31.095 31.623

8 Ministry of Works and Human 0.000 0.000 0.000 13.148 9.498 22.646 Settlements

9 Ministry of Education 0.000 0.000 0.000 7.565 14.613 22.178

10 Ministry of Home and Cultural 0.000 0.000 0.000 0.000 2.832 2.832 Affairs

Total 3.249 70.036 250.265 156.181 65.862 545.593

Corporation and Financial Institutes

1 Pendent Cement Authority Limited 0.000 0.000 39.462 3.906 2.208 45.576

2 Food Corporation of Bhutan Limited 0.000 0.000 0.000 0.315 0.085 0.400

3 Construction Development 0.000 0.000 0.000 0.030 0.174 0.204 Corporation Limited

4 Wood Craft Centre Limited 0.000 0.000 0.000 0.000 0.296 0.296

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5 Bhutan Postal Corporation Limited 0.000 0.000 0.000 0.000 0.115 0.115

6 Total 0.000 0.000 39.462 4.251 2.878 46.591

As shown in Chart 2, the highest unresolved irregularities fall under Shortfalls, Lapses and Deficiencies followed by Fraud, Corruption and Embezzlement and then by Mismanagement. The least is under the Violation of Laws and Rules.

Chart 2. Unresolved irregularities by category, AAR 2009 to 2013 as on 30th September 2015

Unresolved Irregularities

345.382 350 300 250 200 138.838 150 109.226 100 18.295

50 Amoun( Nu.million) in Amoun( 0 Fraud, Corruption Mismanagement Violation of Laws Shortfalls, Lapses and and Rules and Deficiencies Embezzlement Irregularities Category

PAC’s Observations

The recovery rate of irregularities for the period 2009-2013 is low (8.02%) due to lack of accountability fixation mechanism other than the payable of 24% penal interest. The Parliament during the 3rd session of the Second Parliament had directed that all pending issues of AAR till 2010 be resolved by the agencies concerned within 30th April, 2014 and that of AAR 2011-2012 be resolved by 30th November, 2014. However, the response from the agencies has been poor resulting into low recovery.

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PAC’s Recommendations 5

For better use of public resources and assuring accountability to the people, the head of the agency is directly accountable for monitoring and resolving the audit irregularities. Therefore, the head of the concerned agency has to take legal action on the officials if the audit irregularities are not resolved within 12 months from the date of issue of audit report and accordingly report the implementation status to RAA latest by 30th September of each financial year for incorporation in the AAR. However, the head of the agency has to report the legal action taken on the irregularities from 2009 to 2013 to RAA latest by 30th March 2016. Accordingly, the RAA should report the implementation status in 2015 Annual Audit Report as separate chapter. The Ministry of Finance has to issue a Circular to all agencies for implementation of the resolution.

CHAPTER III: STATUS OF CASES FORWARDED TO ANTI- CORRUPTION COMMISSION (ACC)

Out of 51cases forwarded to ACC, 26 cases (50.98%) have been resolved, and 21 cases are unresolved (Table 5). Further, unresolved cases are categorized into cases under investigation, submitted to Office of Attorney General (OAG), sub judice and returned for administrative actions.

Table 5. Status of cases of forwarded to ACC by RAA

AAR No. of No. of No. of Unresolved cases forwarded Resolved cases cases No. of No. of Cases cases in No. of returned for No. of cases the Office cases in administrative under of the action investigation Attorney Court General

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2009 6 3 0 0 3 0

2010 6 5 0 1 0 0

2011 7 3 0 3 1 0

2012 12 5 2 2 0 3

2013 7 5 1 0 0 1

2014 13 5 1 0 2 5

Total 51 26 4 6 6 9

Status of the cases under investigation:

a) Audit Report on the Revenue Accounts of Thimphu Dzongkhag for the period 1/7/2009 to 30/06/2010. This case is yet to be investigated by the ACC.

b) Audit Report on the Accounts and Operation of Penden Cement Authority Limited (PCAL), Gomtu for the period 1/1/2011 to 31/12/2011. This case is yet to be investigated by the ACC.

c) Audit Report on Government Land and Government Reserve Forest for the period ended 31/12/2012. The preliminary investigation has been started but put to halt temporarily due to some other pressing cases.

d) Audit Report on Royal Monetary Authority of Bhutan (RMAB) on manipulation and tampering of documents by one of the Dy. Governors resulting into inadmissible payment of USD 420. The Commission meeting dated 13/10/2014 decided to club it with earlier complaints 13/9/30 and 13/10/31 and is yet to be investigated.

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PAC’s Observations

As per section 48 (b) of the Audit Act, the RAA has forwarded the irregularities to ACC that may have indicative of fraudulent offences. Further, the protocol of mutual assistance and information sharing between the RAA and ACC was signed for preventing and combating corruption, and promoting good governance. Individual with multiple responsibilities has the potential to undermine the fairness because of the possibility of a clash between the self's interest and professional interest, therefore, the chances of corruption is more likely to exist. No uniformity maintained with the officials involved in the corruption cases, some are suspended immediately upon qualification for investigation while some still works in office even after the qualification of investigation on corruption issues. The committee also observed that a junior designation staff who does not have the authority has been charged with of supervisory accountability when the official charged for corrupt intend is an executive official of the institution. There is no clear information to fix accountabilities. The manipulation and tampering of the documents case of Royal Monetary Authority of Bhutan was qualified for investigation a year ago, but the case is still not yet investigated.

PAC's Recommendations 5

The Government must look into the work of the officials entrusted with multiple responsibilities and need to reassign the work in order to avoid undermining of fairness ultimately leading to reduction of corruption practice.

The committee felt imperative to maintain the standardization of suspending the officials involved in the corruption practices after qualifying for the investigation by the Anti Corruption Commission of Bhutan mainly on the following reasons:

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 Risk of Manipulating/Replacing the documents  Risk of Tampering the documents  Risk of Tutoring the witnesses  Risk of Flight

Manipulation and tampering of the document resulting into inadmissible payment by one of the Dy. Governor is a serious concern under category 1 and such high profile issue requires immediate attention of the ACC to investigate.

CHAPTER IV: PAC’S BUSINESS

1. PAC Public Hearings

PAC has conducted Public Hearings of 4 Agencies which included Ministry of Foreign Affairs, Samtse Dzongkhag, Naja Gewog and Penden Cement Authority Limited (PCAL) as per the Rules of Procedure of the PAC 2015. During the public hearings, the concerned auditors from the RAA have participated as witness and provided clarifications. During the question and answer session, the committee asked the agencies to resolve the cases proactively as early as possible by producing/submitting necessary documents to RAA for further review.

2. PAC as an associate member to Commonwealth Association of PAC (CAPAC)

The PAC of Bhutan had the opportunity to participate on the 5th Westminster Workshop of CAPAC in Malta in June 2015 in the capacity of Secretary General of ARAPAC. The Executive Secretary of Commonwealth Association had made a special mention about PAC Bhutan in the meeting and declared it to be the First

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Associate member of CAPAC. The Chair of the CAPAC, Chair of the PAC of Malta has already extended invitation to PAC Bhutan for associate membership on Oct 2, 2015. The Constitution of CAPAC and application membership form are attached as annexure.

3. Establishment of Asian Regional Association of PAC (ARAPAC) Permanent Secretariat in Bhutan

The decision to establish ARAPAC was taken in Dhaka, Bangladesh at a meeting of PACs across the SAARC region, in November 2009 to facilitate the exchange of information, opinion and experience relating to public Accounts Committees and to discuss matters of mutual interest to the members. The World Bank Group agreed to provide a temporary secretariat at the regional association.

The ARAPAC was established at a meeting in 2010 in Bangladesh. The Association has PACs from East and South East Asia and currently has 14 member countries. The member countries are Afghanistan, Bangladesh, Bhutan, Indonesia, Malaysia, Maldives, Myanmar, Nepal, Pakistan, Sri Lanka, Singapore, Thailand, Timor Leste and Vietnam.

During the Annual General meeting held in Kathmandu, Nepal from 9th to 11th September 2015, it discussed about the establishment of a Permanent Secretariat for the PAC. The member countries deliberated in length and eventually agreed to set up the Permanent Secretariat in Bhutan for three years and the World Bank Group agreed to provide the funds/budget for this project. The secretariat will be responsible for the day–to-day running of the organization. The PAC of Parliament of Bhutan has been serving as Secretary General of ARAPAC since its inception. The Constitution of ARAPAC is attached as annexure.

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Considering the benefits that it would have for the country and as enshrined in the ARAPAC Constitution, the PAC recommends the establishment of ARAPAC‘s Permanent Secretariat in Bhutan. Similarly, joining CAPAC as an associate member would benefit in the capacity building of PAC members of the Parliament.

CONCLUSION The PAC is able to present this synthesized report to the Parliament only with the good support of Royal Audit Authority and other stake holders. The committee has high expectation that the House is informed and clarified enough on the audits irregularities. Further, the committee is hoping meaningful deliberation on the report especially the recommendations.

Annexure a. Status of Audit report 2014 b. Summary of the Review Report of AAR 2009-13 c. Status of cases forwarded to ACC d. Constitution of the ARAPAC e. Constitution of the CAPAC

*** Tashi Delek ***

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