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 Bhutan. 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. 1 | P a g e 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); 2 | P a g e 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), Sampheling Gewog (Nu. 0.186 million), Bongo Gewog (Nu. 0.045 million) and Phuntsholing Gewog (Nu.0.045 million) under Chhukha Dzongkhag; 2. Lunana Gewog (Nu. 0.200 million) under Gasa Dzongkhag; 3. Gakiling Gewog (Nu.0.710 million) under Haa Dzongkhag; 4. Naja Gewog (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 3 | P a g e 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 Thromde 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. 4 | P a g e 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. 5 | P a g e Chart 1. Irregularities by category Category wise irregularities 263.888 300 250 200 135.049 136.458 150 98.918 100 50 Amoun( Nu inAmoun( 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 6 | P a g e 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