AUDIT REPORT ON THE ACCOUNTS OF DISTRICT COUNCIL AND MUNICIPAL COMMITTEES DISTRICT KARAK AUDIT YEAR 2015-16 AUDITOR GENERAL OF PAKISTAN i TABLE OF CONTENTS ABBREVIATIONS AND ACRONYMS ....................................................................... iv PREFACE ....................................................................................................................... vi EXECUTIVE SUMMARY ............................................................................................ vii SUMMARY TABLES AND CHARTS ........................................................................... x Table 1: Audit Work Statistics ......................................................................................... x Table 2: Audit observations classified by categories ....................................................... x Table 3: Outcome Statistics ............................................................................................. xi Table 4: Table of Irregularities pointed out .................................................................... xi Table 5: Cost Benefit ...................................................................................................... xii CHAPTER-1 .................................................................................................................... 1 1.1 DISTRICT COUNCIL AND MUNICIPAL COMMITTEES, KARAK ............ 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 with PAC Directives .................... 2 1.2 Audit Paras Municipal Committee Karak ........................................................... 4 1.2.1 Irregularity & Non Compliance .......................................................................... 4 1.2.2 Internal Control Weaknesses ............................................................................. 11 1.3 AUDIT PARAS OF MUNICIPAL COMMITTEE BANDA DAUD SHAH ... 18 1.3.1 Irregularity & Non Compliance ........................................................................ 18 1.3.2 Internal Control Weaknesses ............................................................................. 22 1.4 AUDIT PARAS OF MUNICIPAL COMMITTEE THAKHT-E-NASRATI ... 26 1.4.1 Irregularity & Non Compliance ........................................................................ 26 1.4.2 Internal Control Weaknesses ............................................................................. 30 1.5 AUDIT PARAS OF DISTRICT COUNCIL KARAK ..................................... 33 1.5.1 Irregularity & Non Compliance ........................................................................ 33 1.5.2 Internal Control Weaknesses ............................................................................. 38 1.6 AUDIT PARAS OF KARAK DEVELOPMENT AUTHORITY .................... 43 1.6.1 Irregularity & Non Compliance ........................................................................ 43 1.6.2 Internal Control Weaknesses ............................................................................. 45 Annexure-I Detail of MFDAC Paras ............................................................................ 49 Annexure-2 Audit Impact Summary ............................................................................. 50 ii Annexure-3 Detail of non imposition of penalty ........................................................... 51 Annexure-4 Detail of non recovery of taxes .................................................................. 52 Annexure-5 Detail of overpayment ................................................................................ 53 Annexure-6 Detail of overpayment ................................................................................ 54 Annexure-7 Detail of non recovery of outstanding due ................................................. 55 Annexure-8 Detail of non imposition of penalty ........................................................... 56 Annexure-9 Detail of works without tender ................................................................... 57 Annexure-10 Detail of overpayment due to allowing higher rates ................................ 58 Annexure-11 Detail of abnormal delays in works ......................................................... 59 Annexure-12 Detail of non recovery of sales tax ........................................................... 61 iii ABBREVIATIONS AND ACRONYMS AA Administrative Approval AP Advance Para APRs Actual Payee’s Receipts ADP Annual Development Programme BOQ Bill of quantity B&R Buildings & Roads CCO Chief Coordination Officer CMO Chief Municipal Officer CMD Chief Minister Directives CPWA Central Public Works Accounts CPWD Central Public Works Deparntment C&W Communication & Works DAC Departmental Accounts Committee DDO Drawing & Disbursing Officer GFR General Financial Rules GST General Sales Tax HDPE High Density Polyethylene IESCO Islamabad Electric Supply Company KDA Karak Development Authority KP Khyber Pakhtunkhwa LCB Local Council Board LGA Local Government Act LGE&RDD Local Government Election & Rural Development Department MFDAC Memorandum for Departmental Accounts Committee MRS Market Rates System MC Municipal Committee NTDC National Transmission & Despatch Company PAC Public Accounts Committee PAO Principal Accounting Officer iv PC-I Planning Commission Proforma-I PCC Pacca Concrete Cement PD Project Leader PEC Pakistan Engineering Council PFC Provincial Finance Commission PLA Personal Ledger Account PVC Poly venial chloride RDA Regional Directorate of Audit SFT Square Feet SNGPL Sui Northern Gas Pipeline Limited TESCO Tribal Electric Supply Company UC Union council WAPDA Water and Power Development Authority WSS Water Supply Scheme ZAC Zilla Accounts Committee v 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 District Council and Municipal Committees. The report is based on audit of the accounts of District Council and Municipal Committees Karak 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 the systemic issues and audit finding carrying value of Rs 1 million or more. Relatively less significant issues are listed in the Annexure-1 of the Audit Report. The Audit Observations listed in the 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 observations 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 Audit observations included in this Report have been finalized without 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 168 of Khyber Pakhtunkhwa Local Government Act 2012 to be laid before appropriate legislative forum. Islamabad (Rana Asad Amin) Dated: Auditor General of Pakistan vi EXECUTIVE SUMMARY The Directorate General Audit, District Governments, Khyber Pakhtunkhwa, Peshawar, is responsible to conduct the audit of all District Councils, Municipal Committees (MCs) and Union Councils (UCs). Its Regional Directorate of Audit Kohat has audit jurisdiction of District Councils, Municipal Committees and UCs of three Districts i.e. Kohat, Karak and Hangu. The Regional Directorate of Audit Kohat has a human resource of 08 officers and staff, constituting 2232 man days and a budget of Rs 8.849 million was allocated during Financial Year 2015-16. 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 carried out by Local Governments in Kohat Division. Accordingly, Regional Director Audit Kohat carried out audit of the accounts of District Council and Municipal Committees Karak for the Financial Year 2014-15 and the findings have been included in the Audit Report. The District Council Karak and Municipal Committees in District Karak 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. vii a. Scope of audit The total expenditure of the District Council and Municipal Committees, District