ISLAMABAD: The Auditor General of Pakistan (AGP) has pointed out serious financial misstatements, governance lapses, and operational inefficiencies in the Power Planning and Monitoring Company (PPMC), an arm of Power Division, raising concerns about transparency and accountability in Pakistan’s power sector.
According to an official audit-based financial analysis report year 2025-26 covering the period from 2020-21 to 2024-25, there are significant weaknesses in financial reporting, internal controls, and compliance with regulatory frameworks. The auditors issued a qualified opinion, indicating that the financial statements cannot be fully relied upon due to multiple unresolved issues.
At the heart of the audit findings is the improper accounting treatment of Material Inspection Fee (MIF) income. The auditors noted that PPMC deducted a 40 percent share attributed to the National Transmission and Dispatch Company (NTDC), despite a lack of evidence supporting NTDC’s entitlement. The audit suggested that PPMC should have recognised the entire amount as its revenue under international accounting standards.
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This discrepancy alone runs into hundreds of millions of rupees and points to deeper issues in revenue recognition practices. The absence of supporting documentation and unclear contractual obligations between entities has further complicated the matter.
The audit flagged the inability to verify an advance balance from the Central Power Purchasing Agency (CPPA-G), citing missing reconciliations and insufficient evidence. This has cast doubt over the accuracy of reported liabilities and receivables, further weakening confidence in the company’s financial disclosures.
The audit also highlighted serious concerns regarding fixed assets, where the company failed to provide a proper asset register or allow physical verification. Without such records, auditors could not confirm the existence or condition of assets worth tens of millions of rupees.
In addition, discrepancies in balances with key power sector entities, including DISCOs, NTDC, and others, remained unresolved. In several cases, confirmations were routed through management instead of being independently verified, undermining their credibility.
Collectively, these issues reflect systemic weaknesses in documentation, reconciliation processes, and internal controls—factors that significantly impair the reliability of financial statements.
Despite these governance concerns, PPMC’s financial performance shows a mixed picture. The company demonstrated strong revenue growth over the five-year period, with total revenue reaching over Rs1.07 billion in 2024-25, driven primarily by increased management and inspection fee income.
However, this positive trend was offset by a sharp rise in operating expenses, which climbed to over Rs567 million during the same period. As a result, the operating profit margin declined significantly compared to the previous year, indicating mounting cost pressures.
Finance costs also surged dramatically, adding further strain on profitability. Although relatively small in absolute terms, the increase signals growing financial obligations that could impact future performance.
The Return on Capital Employed (RoCE), a key indicator of efficiency, also declined sharply in the latest year, suggesting that the company is not utilising its capital as effectively as before.
Overall, while PPMC has demonstrated the ability to generate higher revenues, its inability to control costs has undermined profitability, highlighting the need for improved financial management.
According to the Audit Report, the company’s liquidity position improved considerably over the review period. The current ratio rose significantly, indicating that PPMC has strengthened its ability to meet short-term obligations.
However, the cash flow situation tells a different story. The report notes considerable volatility in cash flows, with operating cash turning negative in the latest year despite reported profits. This disconnect suggests inefficiencies in working capital management and raises questions about the sustainability of operations.
Although the company maintains a strong cash balance overall, recurring negative operating cash flows could pose risks in the long term if not addressed.
Beyond financial issues, the audit raises serious concerns about PPMC’s failure to perform its mandated role as the technical and strategic arm of the Ministry of Energy.
The company was tasked with developing frameworks for indigenisation, supporting the Power Sector Indigenisation Plan (PSIP), and standardising technical designs across distribution companies. However, auditors found little evidence of meaningful progress in these areas.
The absence of standardised designs has resulted in fragmentation across DISCOs, increasing the risk of inconsistencies in procurement and technical specifications. This not only affects operational efficiency but also undermines broader policy objectives outlined in national energy plans.
PPMC management has attributed these shortcomings to transitional challenges and overlapping responsibilities with other entities. However, auditors maintain that the lack of tangible deliverables reflects a failure to meet key obligations. The audit also pointed to delays in implementing critical institutional reforms, particularly the transfer of design and standards functions from NTDC/NGC to PPMC.
Despite cabinet approvals and official directives, the transition remains incomplete. This has led to continued fragmentation of responsibilities and hindered efforts to establish a unified framework for the power distribution sector, audit said adding that such delays not only violate policy directives but also create inefficiencies that can have far-reaching implications for the sector’s performance and development.
Another major concern highlighted in the report is the weak implementation of the revenue mechanism.
Although PPMC was authorised to recover management fees from DISCOs, the company failed to establish a proper billing mechanism. Instead, it received advance payments from CPPA-G without issuing invoices or obtaining regulatory approval from NEPRA.
The audit describes this practice as a serious lapse in financial oversight and transparency, as it bypasses essential regulatory and contractual requirements. The absence of formal agreements with DISCOs further exacerbates the issue, raising questions about the legitimacy of revenue recognition.
The audit report has also uncovered multiple irregularities in human resource management, particularly in senior appointments and organisational structure.
In one notable case, the salary of the Managing Director was significantly increased shortly after appointment, exceeding the advertised range and without a formal performance evaluation. Auditors viewed this as a breach of transparency and fairness in recruitment practices.
Further concerns were raised over the abolition of the independent Chief Financial Officer (CFO) position and its merger with other roles. This move undermines the independence of financial oversight and contradicts best practices for corporate governance.
Additionally, key positions such as Chief Internal Auditor and Company Secretary remain unfilled, with interim arrangements in place. This lack of qualified personnel in critical roles weakens internal controls and accountability mechanisms.
The audit also highlighted an over-reliance on contractual staff, with repeated extensions and salary increases granted due to delays in regular recruitment. Such practices not only increase costs but also reflect poor human resource planning.
Transparency issues were further evident in the recruitment of Management Trainee Officers (MTOs). The number of positions was increased significantly after initial advertisement without proper re-notification, and inconsistent selection criteria were applied across different categories.
These practices raise serious questions about fairness and meritocracy in hiring, potentially undermining public confidence in the organisation.
The audit concludes with a series of recommendations aimed at addressing the identified weaknesses. These include strengthening internal controls, improving documentation and reconciliation processes, and ensuring compliance with regulatory frameworks.
The company has also been urged to fulfill its mandated functions, expedite institutional reforms, and enhance governance practices.
In particular, restoring the independence of key positions such as CFO, appointing qualified professionals in critical roles, and implementing transparent recruitment processes are seen as essential steps toward improving accountability.
Copyright Business Recorder, 2026