Auditors appointed to determine railway inefficiency

TAHIR AMIN

ISLAMABAD: The Ministry of Railways has engaged M/s Deloitte to conduct forensic audit of Pakistan Railways to know why the railway is not functioning smoothly, it is learnt.

The Supreme Court of Pakistan, during hearing on November 10, 2011 in a suo motu case, directed Ministry of Railways to conduct forensic audit of Pakistan Railways to know why the railway is not functioning smoothly. In compliance with the directives, M/s Deloitte has been engaged after going through a selection process in line with procurement rules to conduct forensic audit of Pakistan Railways for which contract agreement amounting to Rs 33.92 million has been signed on August 16, 2012.

A total of 20 percent mobilisation advance of the contract amount has been paid to the firm on November 2, 2012. The contract has become effective from November 21, 2012, Railway officials revealed to Business Recorder.

M/s Deloitte has reported to PR Headquarters, Lahore on November 26, 2012 for conducting forensic audit. Pakistan Railways is providing all possible assistance to the firm.

Pakistan Railways (PR) is facing severe operational problems mainly due to shortage of locomotives and rolling stock, resulting in grave financial crises. Due to non-availability of locomotives, freight operations have stalled and passenger trains operations have decreased, which resulted in low revenue earning and pushed the PR into financial marsh.

With more than Rs 23 billion operating deficit, PR registered net cash deficit of Rs 32.642 billion during financial year 2010-11, this trend continued for more than two decades. However, it is getting severe with every passing day. PR has been making efforts through different initiatives to break the vicious cycle of losses during these years, with no tangible results, sources added.

Supreme Court of Pakistan has taken a suo motu action on the prevailing financial crises of PR and directed that Forensic Audit may be carried

out to ascertain the underlying issues of the prevailing crises, fixing the responsibility, where lapses, if any, are found to have been committed.

The scope, areas and requirements included to ascertain the reasons as to why PR is not functioning smoothly, to investigate factors, both internal and external, which have contributed to current situation, to study the governance and legal framework of PR. Investigate underlying issues in the organisational design in terms of structure, inter-departmental coordination, job description, reporting relationships, etc.

To investigate internal systems and processes of Pakistan Railways with special focus on financial management, procurement management, rolling stock management, infrastructure management, land matters, human resource and operation management.

The specific area for Forensic Audit included the repair and maintenance of rolling stock (locomotives, carriages and wagons), budgetary provision including financial arrangement with Ministry of Finance, Financial management/accounting, leasing of land during the last ten years, leasing of Royal Palm Golf Club, bulk sale of scrap, cancellation of Passenger Trains, use of contaminated Lube oil in D.E. Locomotives, contract for procurement of 69 D.E. Locomotives and its performance, contract for procurement of 75 D.E. Locomotives and maintenance contract for 69 D.E. Locomotives.

Sources further said that the time for submission of final Audit Report is 90 days including the period spent on ground checking.

In addition to the audit opinion, the auditor will prepare a “management letter,” in which the auditor will give comments and observations on the accounting records, systems, and controls that were examined during the course of the audit; identify specific deficiencies and areas of weakness in systems and controls and make recommendations for their improvement and communicate matters that have come to their attention during the audit, which might have a significant impact on the implementation of the project.