Absence of internal audit triggers huge money leakage

KARACHI – Whereas the current politically-embattled government is facing the worst financial crunch, partly due to a narrow tax base, lack of a proper check on the provincial revenue-collecting departments is triggering seepage worth billions of taxpayers’ every year.
If taken as a case study, Sindh, the country’s revenue engine which contributes over 60 percent to the national kitty annually, had to face a loss of over Rs 3.639 billion tax money during the audit year 2008-09. This was because of an absence of “internal audit” controls in its seven revenue-collecting departments. Even the given Rs 3.639 billion is not an exact estimate of the financial pilferages, as reveals the Audit Report of Auditor-General of Pakistan (AGoP) on account of revenue receipts of Sindh government for the audit year 2009-10.
“Due to non existence of internal audit, the exact quantum of financial irregularities could not be ascertained,” the report said adding “Findings of the audit report are result of test check showing non-recovered amount of Rs 3639.063 million.”
“It is obvious that the total volume of un-recovered amount would be much higher,” it further said. The auditor general proposed that the “escaping revenue” could well be assessed and recovered in time, only by improving the departmental control. But, provincial governments do not seem to be wary of the financial tax losses as the AGoP pointed out in the report saying that “Despite repeated requests, revenue collecting departments have not established internal audit cell.”
According to provincial finance accounts, the Excise and Taxation, Board of Revenue, Mines and Minerals, Irrigation and Power, Agriculture, Transport and Home departments could not achieve the Rs 22.073 billion revenue target for 2008-09. These provincial departments, which are yet to heed to the AGoP’s repeated calls for establishing an internal audit cell, could manage to collect Rs 21.729 billion, some Rs 343.74 million less than the targeted amount, perhaps, for money leakages.
The audit report reveals that one of these departments, Irrigation and Power, even collected zero taxes against the targeted Rs 886 million during the year under review. The above departments levy at least 17 various taxes on agriculture, property, professions, trade, vehicles, hotels, electricity, water, infrastructure and natural resources.
The fact that the AGoP audited only 31 percent or Rs 6.731 billion of the total Rs 21.729 billion revenue receipts also indicates that there must be more, and huge of course, leakages in the remaining un-audited tax money. It is perhaps for the lack of check and balance that the revenue collection in the provinces is decreasing and is hence widening budget deficits.
The audit report shows that except the two, Excise and Taxation and Mines and Minerals, the revenue collectors in all other departments collected less than what was targeted by the provincial economic mangers. The report shows that, during the audit year, the Board of Revenue, Irrigation and Power, Agriculture, Transport and Home departments had missed their revenue targets, respectively, by 36 percent or Rs 2.84 billion, 100 percent or Rs 886 million, 36 percent or Rs 50.49 million, 83 percent or Rs 187.87 million and 97 percent or Rs 446.07 million.
The Excise and Taxation and Mines and Minerals departments had, however, achieved a surplus of Rs 3.948 billion and Rs 118.94 million against their respective targets of Rs 12.185 billion and Rs 310 million. The AGoP recommended that establishing an effective internal audit, reporting directly to the Principle Accounting Officers, and strengthening internal controls, could only improve the existing situation and check the leakages of revenue.
“Services of internal audit may also be used for monitoring and evaluation quarterly collection of revenue against the benchmarks fixed thereof,” the auditor general said.