Telecom sector: Rs 95.79 billion irregularities detected

The Auditor General of Pakistan (AGP) has detected embezzlements, irregularities, loss and mismanagement of Rs 95.79 billion in the accounts of Telecommunication Sector. This includes the Rs 1.2 billion procedural violations including internal control weakness and irregularities not considered worth reporting to the Public Accounts Committee (PAC) by the AGP.
According to Audit Report 2010-11 on the accounts of telecommunication sector available with Business Recorder: (i) The receivable management of telecom entities remained weak which resulted in non-recovery of an amount of Rs 14.86 billion, (ii) Misuse of powers by the Authority amounted to Rs 667 million in one case, (iii) Obstruction in the process of audit and non production of record amounting to Rs 2.497 million was noted in three cases, (iv) Violation of rules, irregular expenditure/payment and unauthorised retention of money was pointed out in 37 cases amounting of Rs 10.72 billion, (v) Overpayment on account of pay and allowances and TA/DA was also observed in four cases of Rs 5.743 million, (vi) Lack of internal controls in utilisation of resources amounting to Rs 414.218 million was noted in 16 cases, (vii) Loss to national exchequer due to non-auction of available spectrum worth Rs 67.8 billion was highlighted in three cases, (viii)Extravagant expenditure amounting to Rs 84.659 million was noted in one case, and (ix) loss of Rs 37.065 million was pointed out in five cases.
Audit Report 2010-11 revealed that national kitty faced loss of 66.112 billion due to non-auction of available Wireless Local Loop (WLL) spectrum in 1900 MHz Band and non-production of record. Pakistan Telecommunication Authority (PTA) presented a proposal regarding auction of available WLL spectrum in 19000 MHz Band during 35th Board meeting held on 11th January, 2010.
The board approved the auction of the available spectrum of 5 MHz in all 14 telecom regions, 10 MHz in NTR-II and 15 MHz in HTR in 1900 MHz Band. The board further approved the requirement of Pak Army to be considered in other frequency bands to meet their future requirements; and it was further decided that the committee already formulated would also set base price for auction of this spectrum within 30 days.
The available WLL spectrum in 1900 MHz band was not auctioned as decided in the Board meeting which resulted in a loss of Rs 66.112 billion to national exchequer. The decision of the Board was not implemented within 30 days. The loss was calculated on the basis of previous auction on WLL frequency. The Frequency Allocation Board (FAB) made these frequencies available for auction but PTA did not carry out the auction process causing loss to national exchequer.
The matter was discussed in the DAC meeting held on January 3, 2011 which directed the management to expedite the process of auction. No further progress was reported till the finalisation of the audit report. In another case, the report exposed that the nation faced loss of Rs 6.92 billion due to less realisation of Access Promotion Contribution (APC) for Universal Service Funds (USF).
The audit examined the receivable ledgers on sample basis which revealed that an amount of Rs 6.92 billion on account of APC for USF was not realised as billed from the operators during 2009-10 in violation of Section 10 Sub Section (2) of Access Promotion Regulation, 2005.
The report says that non-recovery of receipts is indicative of weak internal controls devised for realisation of receivables. The Government was deprived of revenue due to non-recovery of government dues and its deposit to public account well in time. The audit pointed this out to the management and PAO during October to December 2010. The response was that PTA had recovered a total of Rs 1.9 billion from July 1, 2010 till November 23, 2010 which reduced the total receivable to Rs 4.98 billion.
The recovered amount was to be verified from original record and balance was to be recovered at the earliest and particulars were to be provided to audit. DAC meeting was scheduled on January 3, 2011 but could not be held. The report further revealed that the nation faced a loss of Rs 4.484 billion due to non-recovery and non-account of receipts of initial spectrum fee.
The report said that the audit examined the files of WLL operators on test check basis which revealed that the grace period granted by the Government of Pakistan had ended on March 16, 2010. The WLL operators were liable to pay 50% balance of initial spectrum fee against frequencies of 450 and 1900 MHz amounting of Rs 4.484 billion. At the end of the grace period ie 30th March, 2010, the management did not pursue recovery and no show cause notice was issued to the defaulters. As a result the entire balance amount remained outstanding. The audit says that non-recovery and non-accountal of the PTA receipts reflects the ineffective financial management of PTA and weak internal controls devised for realisation of receivables.
The audit pointed this out to the management and PAO during October to December 2010. The management replied that the show cause notice dated June 2, 2010 was issued to DV Com for non-payment of ISF by the due date but payment was not made by the operator. The WLL operators had gone to court and the matter is subjudice.
The report says that the national kitty also faced the loss of Rs 1.103 billion due to irregularities in investment of trust funds. The report says that Telephone Industries of Pakistan made an investment of Rs 1.103 billion by violating the rules against employees related funds ie Executive/Employees and Workers Pension Fund, Post Retirement Medical Benefit and Gratuity etc in the National Saving Centre and different banks without any investment committee, investment policy and holding of trust funds. Further, there was no investment management unit with deployment of qualified staff.
The audit says that reply of the management was not acceptable as the record did not show that any investment policy was prepared and placed before the Board for approval. The DAC meeting held on January 4, 2011, directed the management that approved investment policy be provided to audit for verification. No progress was reported to audit in this regard till the finalisation of the report.
The nation faced the loss of Rs 938.1 million due to non-recovery of outstanding dues on account of USF charges and APC for USF, Rs 661.731 million non-recovery of outstanding dues on account of R&D contribution, Rs 401.917 million non-recovery of dues from mobile and telecom operators, Rs 642.59 million non-receipt of spectrum charges from PEMRA on account of broadcasting spectrum and FM licensing and billion rupees of other cases were detected by AGP.