ISLAMABAD: The Cabinet has directed the Ministry of Finance to complete forensic audit of five top loss-making entities by June 30, 2021, official sources told Business Recorder.
These entities are: (i) Pakistan Railways; (ii) Pakistan International Airlines Corporation; (iii) Sui Southern Gas Company Limited; (iv) Peshawar Electric Supply Company (Pesco) and; (v) Genco-III: Northern Power Generation Company Limited.
On March 16, 2021, Secretary Finance Division gave a presentation to the Federal Cabinet on status of forensic audit of the top loss-making SOEs.
Sharing the background, he informed the cabinet that the Prime Minister had been pleased to direct the Ministry of Finance to have a forensic audit of major loss-making State-Owned Enterprises conducted for the last ten years. Guidance of Cabinet Committee on State Owned Enterprises (CCoSOEs) was sought on: - Identification of SOEs to be audited Forensic audit by AGP or reputed audit firms Scope and ToRs of the proposed forensic audit.
The sources said CCoSOEs directed to consult relevant Ministries/Divisions to select major loss-making SOEs obtain information from AGP and private audit firms regarding cost, capacity and time-duration for undertaking forensic audit of loss-making SOEs.
After consultations, a summary was submitted to CCoSOEs for approval of: ToRs SOEs to be audited by the AGP SOEs to be audited by reputed audit firms.
CCoSOEs approved the summary on January 15, 2021. On February 9, 2021 the AGP was advised to initiate audit of following entities: (i) Pakistan Railways; (ii) Pakistan International Airlines Corporation; (iii) Sui Southern Gas Company Limited ;(iv) Peshawar Electric Supply Company (Pesco) and; (v) Genco-III: Northern Power Generation Company Limited.
CCoSOEs further directed to engage reputable audit firms for the forensic audit of the following entities: (i) Pakistan Post Office; (ii) Quetta Electric Supply Company Limited; (iii) Hyderabad Electric Supply Company Limited; (iv) Lahore Electric Supply Company Limited and; (v) Sukkur Electric Power Company Limited.
The following firms were consulted on the proposed forensic audit engagement: (i) KPMG Taseer Hadi & Co; (ii) Ernst & Young Ford Rhodes; (iii) Deloitte Yousuf Adil & Co; (iv) BDO Ebrahim & Co and; (v) Grant Thornton Anjum Rahman. A F Ferguson was invited but did not attend the meeting.
The sources said, consultations were held with leading audit firms to discuss the scope and ToRs which have been improved and refined. The Finance Division is in the process of obtaining approval of CCoSOEs on revised ToRs. Thereafter, tendering will be floated as per PPRA rules within two weeks.
During the discussion, some of the members observed inordinate delay in start of forensic audit of SOEs, directions for which were given by the Cabinet at the advent of new government, two and half years ago. It was pointed out that the specific Cabinet decision to conduct forensic audit of top ten loss-making SOEs was taken mid last year. Appraising the initial reluctance of private Audit Firms, the Finance Division informed that through protracted discussions, the private Audit Firms had finally agreed to conduct the forensic audit of SOEs. The Prime Minister urged that the exercise be completed at the earliest as it would help bring about meaningful reforms in the hemorrhaging SOEs. A question was raised why forensic audit of all SOEs was not being conducted as even the profit-making SOEs could be operating below par. The Adviser on Institutional Reforms and Austerity informed that out of the 85 SOEs, 33 were loss-making and among the latter the top 3 accounted for 85% of the losses. It was further clarified that the annual financial audit of all SOEs was being conducted.
A member pointed out that there were several SOEs whose normal financial audit had not been conducted for past several years. The Cabinet asked the Finance Division to present a statement, in respect of all SOEs showing the year last financial audit was done, reasons for the pendency, status of the audit paras, etc, in the next Cabinet meeting. Advisor to the Prime Minister on Institutional Reforms & Austerity informed the forum that by virtue of reforms introduced by the present government, the annual audit had been made current otherwise several years' old paras were being presented before the Public Accounts Committee.
After details discussion, the Cabinet directed Secretary Finance that forensic audit of top five loss-making SOEs be completed by 30th June 2021 and the process for remaining five entities be expedited. A statement, in respect of all SOEs, showing the year last financial audit was done, reasons for pendency, status of the audit paras etc., be presented in the next Cabinet meeting.
Copyright Business Recorder, 2021