Chapter 18
Food, Agriculture & Livestock
Division
Audit Period
Audit Year 2007-08
Auditable Expenditure
Grant No.
Particulars
Rupees
Current/ Non-Development Expenditure
49
Food, Agriculture and Livestock Division
50
Agriculture Research
51
Other Expenditure of Food, Agriculture and
Livestock Division
Development Expenditure
144
Food, Agriculture and Livestock Division
145
Agriculture Research
Total
169,630,000
700,000
513,097,000
683,427,000
11,952,109,000
433,393,000
12,385,502,000
13,068,929,000
Audit Formations

Pakistan Agriculture Research Council

Food, Agriculture and Livestock, Islamabad

National Program me for improvement of Water resources in Pakistan

Agri-business development and diversification project
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Audit Team
S.No.
1.
Name
Dr. Akmal Minallah
2.
Nazar Rauf Rathore
3.
Muhammad Adnan
4.
Naeem Akhtar
5.
Muhammad Arshad
Designation
Role
Director
Finalization of Audit report,
Holding DAC meetings
Dy. Director Supervision of audit activities,
Planning of audit,
Review of audit findings,
Review of draft audit report
Audit
Technical support in planning,
Expert
execution & reporting
Assistant
Audit execution,
Audit Officer Preparation of AIRs & draft
audit report
Update audit permanent file
Senior Audit Audit execution,
Officer
Prepare audit working papers
Time Schedule
From 28 November 2007 to 31 January 2008
(For details refer page 309)
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I.
AUDIT OBJECTIVE AND SCOPE
A.
Audit Objective
The overall objective of this audit is to review the management, financial
and operating controls to appraise their adequacy and soundness. As we
are specifically focusing upon expenditure being incurred from the grants
received, it is necessary evaluate the internal controls over expenditure.
The main objectives of the audit of the ministry of environment are:
-
-
-
B.
to attain reasonable assurance whether the financial statements are
prepared in accordance with the identified financial reporting
framework and the sum expanded has been applied in all material
respect for the purposes authorized by the Parliament
to check the system of internal control and compliance with the
respective authorities
to ensure proper classification with respect to account head, function
and cost centre.
to determine that payroll record is complete and accurate. To ensure
that it is being updated and complies with all prescribed rates of
Federal Govt.
to determine if internal controls for recording and safeguarding of
assets are adequate
to provide certification for the foreign aided projects, if any
to perform performance audit of the major education projects, so that
efficiency, effectiveness and the impact of the project on the economy
can be assessed.
Audit Scope
The auditor general is appointed under section 168 of the constitution of
the Islamic republic of Pakistan, 1973 and section 169 defines the
functions and powers of the auditor general as;
-
The auditor general shall, in relation toThe accounts of the federation and of the provinces and
The accounts of any authority or body established by the federation or
a province
Perform such functions and exercise such powers as may be
determined by the parliament or by order of President.
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Further the scope of the auditor general of Pakistan is defined in Section
8 of the Auditor General’s Ordinance, 2001 which, empowers the
Auditor General of Pakistan to audit:




All expenditure from the Consolidated Funds of the Federation and of
each Province;
All transactions of the Federation and of the Provinces relating to
Public Account;
All trading, manufacturing, profit & loss accounts, balance sheets and
other subsidiary accounts kept by order of the President or of the
Governor of the province in any Federal or Provincial Department; and
The accounts of any authority or body established by the Federation
or a province, and in each case report on the expenditure,
transactions or accounts so audited by him.
Audit of Food, Agriculture and Livestock Division will be conducted in
accordance with the requirements of OAGP Auditing Standards as
enshrined in FAM. The scope of audit includes verification and analysis
of current and development expenditure on test check basis and also
includes performance audits as and when required. Compliance testing
and substantive tests have to be performed as appropriate, but due to
the extensive volume of transactions, more emphasis is laid on
compliance testing. Brief description of areas to be covered is as follows:




Current expenditure to be verified on sampling basis to ensure the
completeness, accuracy, relevance, genuineness and proper
classification as well as compliance of grant formalities.
Development expenditure has to be checked and verified on a test
check basis keeping in view
the procedures for the purchases,
the necessary formalities that are required to be fulfilled for
the
expenditure incurred and the related documentation maintained in
support of the expenditure incurred.
Compliance with approved accounting framework which is NAM.
Compliance of the laws and regulations i.e. PC-1, PPRA rules,
financial policies etc.
Compliance audits / reviews of attached Authorities
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II.
SIGNIFICANCE AND UNDERSTANDING OF THE MINISTRY
A.
Significance of Food, Agriculture and Livestock sector in Pakistan
Agriculture sector is the lifeline of Pakistan's economy. It contributes
24% to the GDP, employs 48.4 percent of the labor force and contributes
to 70% of the foreign exchange earnings through export of raw materials;
semi processed and processed agricultural products.
The agricultural growth in Pakistan since 1960s has taken place at a
magnificent rate of 4.3% per annum. It is imperative to increase
availability of water at the farm through development of water resources
and its conservation. Pakistan has built up huge water reservoir capacity
of 18 MAF to store water for release during lean period. An on farm water
management was initiated to minimize water losses during delivery at the
farm. Over the quarter century since the inception of this program, the
demand for water has increased substantially both at the farm and for
human / industrial consumption. The resultant shortage in supply of
water has been further compounded by the drought. The Ministry of
Food, Agriculture & Livestock is undertaking a massive on farm water
management program on war footing to address the issue.
It is seen that the productivity levels of crops in Pakistan are generally
low. There are wide gaps in yields of crops at the farms of progressive
and subsistent growers. The prospects for increase in area are limited.
The Ministry of Food, Agriculture & Livestock is making strenuous efforts
to raise productivity levels through increasing scientists - farmers
contacts, improving out-reach capacity and focusing on electronic
transfer of technology through manpower training and allocation of
resources.
B.
Understanding of the Ministry of Food, Agriculture and Livestock
The ministry is mainly responsible for policy formulation, economic
coordination and planning in respect of food grain, Agricultural & Live
Stock. Major function of the Division includes , procurement of food
grains, fertilizer, import price stabilization of agriculture produce,
international liaison, economic studies for framing agricultural policies,,
fishing and fisheries beyond territorial waters, animal quarantine etc.
Moreover, this Division is actively involved in inspection, grading analysis
of food grains, activities relating to aid/assistance being received from
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the donor agencies, collection and compilation of agriculture statistics,
marketing intelligence and standardization of agricultural machinery.
Agricultural activities also include the identification of under-developed
areas and precautionary measures to remove the causes of underdevelopment of different areas. This Division also administers major
activities towards animal protection, veterinary drugs, and Live Stock
insurance including the poultry and Live Stock products. This division
has eight Attached departments, five Autonomous Bodies and one
Corporation i.e. Pakistan Agriculture Storage and Corporation.
Organizational Structure
The organizational structure of the ministry is annexed as Annexure A to
the chapter.
Principal Address
Ministry of Food, Agriculture and Livestock
‘B’ Block, Pak Secretariat, Islamabad
Ph: 92-51-9201718,
Fax: 92-51-9221246
Website: www.mopw.gov.pk
C.
Status of the Entity and its Core Operations
a)
Status of the entity
Ministry of Food, Agriculture and Livestock is strategically run by elected
representatives of the public and administratively controlled by the
bureaucracy.
Being the primary concern sector for any government this sector is
controlled by each provincial ministry at province level and by district
governments at district level.
b)
Core Operational Activity
The core operational activities of the ministry are,
1.
Economically Co-ordination and planning in respect of food.
2.
Watch over the food supplies (including storage) position in the
country.
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3.
Procurement of food grains, including sugar:a) from abroad;
b) for Federal requirement;
c) for Inter-provincial supplies;
d) for export and storage at ports.
4.
Import and export control on food grains and foodstuffs.
5.
Inspection, grading analyses of food grains and foodstuffs and
maintenance of standards of quality for import and export.
Note:- Inspection, handling, storage and shipment of rice for export
is the concern of Commerce Division .
6.
Preparation of basic plan for bulk allocation of food grains and
foodstuffs.
7.
Price stabilization by fixing procurement and issue prices including
keeping a watch over the price of food grains and foodstuffs
imported from abroad or required for export and those required for
inter-Provincial supplies.
8.
Collection of statistics regarding production, consumption, prices,
imports and exports of food grains.
9.
Food and Agricultural Organization of the United Nations in respect
of food.
10. Co-ordination of work relating to aid/assistance being received from
aid-giving agencies in respect of food sector.
11. Economic, Planning and policy-making in respect of agriculture
*[forestry and wildlife].
12. Agricultural Research Council; Agricultural commodities research.
13. Food and agriculture organization of the United Nations in respect of
agriculture.
14. Co-ordination of work relating to aid/assistance being received from
aid-giving agencies in respect of agriculture sector.
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15. Plant protection:a) standardization and import of pesticides;
b) aerial spray;
c) plant quarantine; and
d) locust control in its international aspect and maintenance of
locust warning organization.
16. Economic studies for framing agriculture policy.
17. Farm management research for planning, project formulating and
evaluation.
18. Seed testing and seed certification; crops forecast and estimation;
crop insurance.
19. Collection and complication of agriculture statistics.
20. Marketing intelligence.
21. Grading of agricultural commodities other than food grains, for
exports.
22. Agricultural commodity research (marketing research and laboratory
research for laying down national grades).
23. Soil survey, comprehensive inventory of the soil resource of the
country and their proper utilization.
24. Standardization and import of fertilizers for meeting Provincial
requirements
25. Introduction of special crops like jute, tea, olive etc.
26. Standardization of agricultural machinery.
27. Under-developed Areas:a) Identification of Under-developed Areas.
b) Identification of the fields in which an area is under developed.
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c) Measures necessary to remove the causes of under-development
in different areas.
28. Administrative control of the PASSCO.
29. Sugar Board.
30. Socio-economic studies for framing agricultural research policies.
31. Agricultural commodities research; Federal Agricultural Research
Organizations (expecting Pakistan Central Cotton Committee and
Soil Survey Department).
32. Coordination of aid/assistance from international aid-giving
agencies and FAO in respect of agricultural research, including
manpower training for research.
33. Research for the introduction of improved germ plasm, both of plant
and animal origin
34. Research coordination in respect of livestock production , livestock
diseases and marine fisheries.
35. Collection of statistics on agriculture research.
36. High level manpower training for agricultural research..
37. Inter-provincial coordination and coordination between the center
and the provinces in respect of agricultural research, including
training of high level agriculture scientist.
38. National policies, planning and economic co-ordination in respect ofi) Live stock including dairy, poultry and fisheries;
ii) Animal disease control.
39. i) Co-ordination of foreign aid and technical assistance in the
livestock sector and related fields;
ii) Liaison with international agencies especially Food and
Agriculture Organization of the United Nations in the field of
livestock.
40. Development and co-ordination of livestock and poultry complexes
with bilateral assistance.
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41. Statistics regarding livestock, poultry and fisheries.
42. Price stabilization measures.
43. Animal protection:
i) Vigilance and measures for prevention of extension from one
Province to another of infectious or contagious diseases affecting
animals;
ii) Animal quarantine and inspection.
44. Veterinary drugs, vaccines and animal feed additives.
i) Import and Export.
ii)Procurement from abroad for Federal requirements and for interprovincial supplies.
45. Livestock, poultry and livestock products;
i) Market intelligence.
ii) Import and export.
iii) Laying down national grades;
iv) Project formulation and evaluation.
46. Standardization of dairy, poultry and meat processing machinery.
47. Livestock insurance.
There is a full commitment at policy level about the importance of
investing in Food, Agriculture and Livestock as a critical input for socio
economic development.
To translate this commitment into action a number of initiatives in
public sector programs (new and ongoing) have been undertaken: the
most notable include the National Program me for improvement of Water
resources in Pakistan, Water Conservation and productivity
enhancement through high efficiency irrigation system program, Agri
business development and diversification project . These programs with
current and future major interventions should help to improve general
uplift of masses.
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Investment in Food, Agriculture and Livestock stood at only 0.38% of the
total federal development program. The government obtains foreign
loan/aid also to invest in the Food, Agriculture and Livestock sector.
Federal Ministry of Food, Agriculture and Livestock is the key
functionary which plays a leading role in regulating aid flow in the Food,
Agriculture and Livestock sector. The common identified objectives are:
o Facilitation of Live stock
o Food security and nutrition
o Improvement of agriculture, forestry and irrigation system
Being the priority agenda of the government a lot can be achieved in
livestock, food and agriculture due to limitations in provision of facilities
if the commitment from the bureaucracy is there.
D.
SWOT analysis
Before considering the risk areas that are at present hindering the
government in fully implementing the objectives in Food, Agriculture and
Livestock sector, the strength/opportunities available for its foster
growth and achieving objectives are discussed below;
Strengths
 Full financial support from Federal Government
Federal Government provides full financial support to the Food,
Agriculture and Livestock support
 Vesting of Powers through Legislation
Devolution of the power through Ministry of Food, Agriculture and
Livestock at all levels of government, that is, federal, provincial and
local government level.
 Availability of large infrastructure
Large infrastructure in federal, provincial and local government is
provided
Weaknesses
The main weaknesses of the system that are identified before starting the
audit engagement activities through discussions with the key officials
and initial system analysis are;
 Lack of Advanced training in research methodologies
instrumentation
 Lack of biotechnology, micro irrigation and fertigation
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 Lack of bio-fertilizer, bio-pesticide, pesticide residue and product
development
 Lack of facilities for removal of field heat
 Inadequate specialized facilities for marketing of horticultural
commodities
 Inadequate cold storage facilities
 Absence of cold chains
 Air cargo flight facilities:
o Development of airports for landing of wide bodied cargo planes
o One window handling facilities
o Limited space and cold storage facilities at airports
 High transit time through sea
 Inadequate linkages with a number of potential importing countries
 Inadequate availability of reefer containers
 Lack of experienced Project Implementers
 Lack of vet-nary doctors/ agriculture scientist
 Lack of International standards laboratories/ research centers
Threats
 Funds might not be utilized for the purposes to achieve the targets.
 Qualified staff leaves the organization
 Change of government may suspend the development projects
undertaken by the present government.
Opportunities
 Accrediting Export Quality
 Post Harvest Handling and Management
 Horticultural field focusing on demand based production systems
 Improving productivity through Integrated Pest Management and
harvest/post harvest management practices
 Import substitution
 Use of Hybrid seed technology
E.
External Factors (PEST analysis):
External factors that might affect the ministry’s performance may
include;
-
Technological factors
Social factors
Political factors
Economic factors
Climatic factors
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Chapter 18: Food Agriculture and Livestock Division
Technological factors
Can lead to burden the budget if the institutes and scholars are targeted
in technology area which can no longer be in demand/use i.e.
Information Technology, Science education
Social factors
Cultural issues can lead to gender bias in some areas resulting in non
availability /non willingness for females in enrolment into programs/
activities
Political factors
 Change of government may abandon present programs
 Funding from the foreign donor may discontinue due to external
pressures.
Economic factors
 If the economic condition of Government detroit, Government may
impose major cut on the Food, Agriculture and Livestock budget
hence resulting in curtailment of Food, Agriculture and Livestock
activities
 High rates of inflation can lead to high cost of Food, Agriculture and
Livestock resulting in low activities
Climatic disaster
 Natural disaster such as earth quake, flood
 Sudden change in weather patterns
F.
Intergovernmental Relationship:
Functionally ministry consists of one main division along with various
line departments/suboffices. The Ministry of Food, Agriculture and
Livestock is responsible for matters concerning National Planning and
Coordination in the field of Food, Agriculture and Livestock.
Departments:
The Departments attached/sub-ordinate with the ministry of Food,
Agriculture and Livestock are;

Economic, Trade and Investment Wing
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












Agricultural & Livestock Products Marketing and Grading Department
(ALMA)
Agricultural Policy Institute (API) Formerly (APCom)
Animal Quarantine Department (AQD)
Central Cotton Research Institute (CCRI)
Department of Plant Protection (DPP)
Federal Seed Certification and Registration Department (FSC&RD)
Introduction of Medicinal Herbs and Spiceis as Crops (IMHSC)
Livestock Wing (LW)
Marine Fisheries Department (MFD)
Pakistan Agriculture Research Council (PARC)
Soil Survey of Pakistan (SSP)
Pakistan Oilseed Development Board (PODB)
Pakistan Central Cotton Committee (PCCC) etc
Various programs are initiated by the government under each
division/department with a sharper focus on poor and unprivileged
segments of the society.
G.
Accounting System of the Ministry:
Ministry of Food, Agriculture and Livestock is a centralized accounting
entity, where, controller general of accounts is responsible for processing
of its accounting transactions and maintaining the accounts. The sub
offices of the controller general of accounts at province and districts
maintain the respective accounts.
Various development projects are undertaken by each line department.
For the purpose of the accounting classification each division and line
departments are classified under cost centers, (the functions), which are
then further classified into various cost element (the objects).
The major cost centers as per New Accounting Model are;
Account
Cost centers
Code
042
Agriculture, food, irrigation, forestry and fishing
For more specific accounting each department and projects to further
detailed level can be classified as cost centre.
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Each cost centre is further divided into cost elements, the major
classification of which is detailed below;
Account
Cost elements
Code
A01
Employee related expenses
A02
Project pre-investment analysis
A03
Operating expenses
A04
Employees retirement benefits
A05
Grants subsidies and write-off loans
A06
Transfers
A09
Physical assets
A13
Repairs and maintenance

Broadly the expenditures are classified as current or non-development
expenditure and development expenditure. Separate budget are
allocated for each type of expenditure.

Gazette officers of at least BPS 16 and above hold the charge of the
post
of
drawing
and
disbursing
officers
in
each
ministry/divisions/departments/development projects.

The budget allocation are on account of


Releases from the federal government
Grant in aid

The budget are transferred
ministries/departments;




AGPR Counter
PLA is maintained with federal treasury and
Assignment account maintained with NBP
Departmental accounts

The budget of province is transferred to account 1 whereas the
budgets of districts are then transferred to a/c IV.

Foreign aided projects maintain departmental accounts where the
expenses are incurred in the department from the government
account and the proportionate share is reimbursed from the aid
account.

Ministry wise list of authorized signatory of the formations audited
dated during the course of audit and annexed as annexure C.
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the
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III.
RISK ASSESSMENT
A.
General Risk Assessment Procedures
Our risk based approach during the audit would be to plan and
document our risk assessment procedures performed so as to obtain an
understanding of the entity and its environment. Our risk assessment
procedures may include inquiries, observations and inspections, and
analytical procedures. The major risk factors that would commonly be
addressed to assess the risk of the entity are;

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
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



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The adequacy of internal controls and the control consciousness
environment is in place;
Participation by those charged with governance
Management approach to taking and managing business risks
Changes in operating environment
Corporate restructuring
Discussions with the management regarding any internal control
weakness, frauds and irregularities identified earlier.
Are changes in the design of internal controls documented and review
by a competent authority;
There is a clearly defined organization structure and the operating
functions are performed independently so as to create segregation of
duties;
The role and authority of the internal audit function (if any), and
review of internal auditor’s assessment of the corrective actions taken,
and to consider the impact on the nature, extent and timing of our
audit tests and procedures;
The nature of transactions (for example, the number and Rupee
volumes and the complexity involved);
Assessment of non-routine transactions and its adequacy of its
documentation and approvals;
Understanding of the financial reporting process;
The age of the system or applications used;
The physical and logical security of information, equipment, and
premises;
Susceptibility of assets to theft and misappropriation;
The adequacy of operating management oversight and monitoring;
Previous regulatory and audit results and management’s
responsiveness in addressing the issues raised;
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

Human resources, including the experience of management and staff,
turnover, technical competence, management’s succession plan, and
the degree of delegation; and
Senior management oversight.
The auditor must be able to identify high risk areas and the high risk
areas may be identified from material weaknesses. Material weaknesses
will be;




B.
Be evident at multiple agencies
Affect a significant portion of the government’s total budget or other
resources
Stem from a deficiency that should be monitored and addressed
through individual agency actions as well as through Office of
Management and Budget initiatives
Major non-compliance of applicable laws and regulations.
Inherent Risk Factors
1) Inherent risk factors associated with activities/programmes



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


Complexity of programs;
Complex, unusual or high value transactions;
Activities involving the handling of large amounts of cash or high
value attractive goods - embezzlement or theft;
Activities of a nature traditionally considered to be particularly
prone to fraud or corruption (e.g. public works and technical
contracts, contracts for the delivery goods);
Urgent operations (e.g. emergency aid) and operations not fully
subject to the usual controls;
Historical evidence of a high incidence of intentional irregularities;
Eligibility criteria inconsistent with objectives (too wide, too
restrictive, not relevant);
Activities that are uninsurable and/or are subject to risks arising
from political, financial, ecological (etc) instability;
2) Inherent risk factors associated with the operating structure



Management approach to taking, managing and mitigating
business risk;
Geographically dispersed organization, or organization operating in
areas where communications are difficult;
Unclear
division
of
responsibilities
within
the
Division/Department;
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

Activities or projects involving numerous partners (coordination
problems, weaknesses in management and communications
structures);
Particular points mentioned in internal and external audit reports,
and in press reports etc.
3) Inherent risk factors associated with the beneficiaries
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Operations where the conduct of beneficiaries is difficult to check,
or where the ultimate beneficiaries may be different from the
apparent recipient;
Beneficiaries highly dependant on public funds;
Activities which imply several levels of subcontracting, making the
identification of eligible beneficiaries difficult;
Historical evidence of a high incidence of intentional irregularities;
Political or administrative pressure exerted by beneficiaries or
participants in the activity;
Imposition of unwanted responsibilities upon organizations,
administrations or beneficiaries;
4) Inherent risk factors associated with the economic or technical
circumstances

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Abnormal trends and ratios;
Results intangible or difficult to evaluate;
Activities that are starting up or coming to an end, or are subject
to rapid technological change;
Unstable sources of supply and variable prices of inputs (raw
materials, etc);
Over-dependence on one supplier (e.g. supplier of equipment has
exclusive maintenance contract, is sole supplier of parts and
materials, software, etc);
5) Inherent risk factors associated with the audited entity

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
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Lack of turnover of personnel and/or personnel not taking holidays
in a sensitive department/area;
Activities with which the audited entity has no or limited
experience;
Activities that are highly dependant upon a small number of key
personnel;
Insufficient staff, or staff and management under-qualified,
inexperienced or poorly motivated;
Peaks and troughs in work patterns and information flows;
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
Utilization of obsolete information technology systems;
6) Inherent risk factors associated with the audited entity’s
management policies and practices
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
C.
Badly defined or unrealistic objectives;
Strong pressure upon management to produce results, achieve
objectives, meet unrealistic deadlines, achieve high rates of
budgetary utilization at the year-end;
Short-term budgetary pressures (e.g. delay in undertaking
necessary maintenance imposes greater costs later);
Management, supervision and control functions poorly suited to
the activity;
Lack of management information system and/or cost accounting
system;
Unclear division of responsibilities within and between the various
departments;
Specific Audit Risks

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

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

Proper utilization of development budget
Violation of PPRA rules, 2004.
Illegitimate payments
Compliance with clauses of grant agreements
Proper authorization and classification of expenses
Incorrect mode of payment
Incomplete record
Misuse and mismanagement of funds
Inadequate control over cash payments and bank payments
The major areas that are considered material and need to be focused
upon during the course of audit includes:
•
•
•
•
•
•
IV.
Employee related expenses
Operating expenses
Grant in aids & write off of loans
Repair and maintenance
Physical assets
Transfers
AUDIT APPROACH
The audit approach would include a combination of financial audit and
compliance audit. At the preliminary stage, the assessment of internal
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control system would be performed to identify the weaknesses that would
lead to the assessment of audit risk. Materiality level is basically
determined at 2 percent of the budgeted amount, but nature of
expenditure is also considered. The departments, offices and projects are
selected on the basis of;
-
High budget appropriation
Grants subsidies and write offs involved
Criticality of audit issues
Sensitivity of core operations
Government high priority areas that are threats for public
-
Huge investment in the procurement
-
Huge investments by the donors and the government
-
Projects not audited in the previous year
The selection of each DDO of each division for current expenditure and
development expenditure is made on the basis of the level of materiality
that is established by determining its nature and its amount. The DDOs
selected have been mentioned individually and the areas to be focused
upon are also mentioned.
The audit approach for efficient and effective would encompass around
understanding of the financial reporting and internal control system,
checking compliance with applicable laws and regulations and
performing compliance testing (test of control) and substantive testing as
appropriate. The audit procedures may include any of the following, but
are not exhaustive of the all the procedures as some of the procedures
may be identified at the time of execution of the audit.








Understanding the client internal control system and identifying
internal control weaknesses and audit risks
Issues highlighted in the previous audit reports that are still
unresolved
Compliance testing to ensure that applicable policies, rules and
regulations and complied with.
Compliance with grant agreement.
Use of sampling to select items for compliance testing and substantive
testing
Vouching payments on a test basis and check the payments for
accuracy, completeness, valuation and ownership
Compliance of PC-1 document
Checking compliance with PPRA rules for the procurements made
during the year.
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



Comparison of actual expenditure with budgeted expenditure
Prepare analytical procedures and Investigate where actual are more
than budget appropriation.
Investigate transfer payments to sub-offices and there utilizations.
Performance audit procedures, if performance audit needs to be
performed:
o Identification of cost savings
o Identification of services that can be reduced or eliminated
Identification of programs or services that can be transferred to
the private sector
o Analysis of gaps or overlaps in programs or services and
recommendations to correct gaps or overlaps
o Feasibility of pooling information technology systems within the
Department
o Analysis of the roles and functions of the department, and
recommendations to change or eliminate departmental roles or
functions
o Recommendations for statutory or regulatory changes that may
be necessary for the department to properly carry out its
functions
o Analysis of departmental performance data and performance
measures
o Financial, economic and technical appraisal of projects
o Identification of best practices.
The understanding of the accounting and internal control system will
enable the auditor to 1) identify types of potential material
misstatements, 2) considers factors that affect the risk of material
misstatements, and 3) design appropriate audit procedures. Therefore,
the auditor should obtain an understanding of the accounting and
internal control system to identify and understand:

Major classes of transactions

How such transactions are initiated

Significant accounting records and supporting documents

Accounting and financial reporting process, from the initiation of
significant transactions and other events to their inclusion in the
financial statements.
The audit procedures would include a combination of compliance testing
(tests of controls) and substantive procedures (test of detail). The
objective of test of controls is to evaluate whether a control operates
effectively, whereas the objective of tests of detail is to detect material
misstatements.
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The auditor is required to perform tests of control when the auditor’s risk
assessment includes an expectation of the operating effectiveness of
controls or when substantive procedure do not provide sufficient
appropriate audit evidence. The auditor selects procedures to obtain
sufficient appropriate evidence that the controls operated effectively
throughout the period of reliance. The more the auditor relies on the
operating effectiveness of controls in the assessment of risk, the greater
is the risk of the auditor’s test of controls. In addition, as the rate of
expected deviation from a control increases, the auditor increases the
extent of testing of the control. The matters that may be considered in
determining the extent of the auditor’s test of controls include the
following:






The frequency of performance of control by the entity during the
period.
The length of time during the audit period that the auditor is relying
on the operating effectiveness of the control.
The relevance and reliability of the audit evidence to be obtained in
supporting that the control prevents, or detects and correct, material
misstatements at the assertion level.
The extent to which audit evidence is obtained from tests of other
controls.
The extent to which the auditor plans to rely on the operating
effectiveness of the control in the assessment of risk.
The expected deviation from the control.
The following are the types of controls to test:
 Financial reporting controls (including certain safeguarding and
budget controls) for each significant assertion in each significant
cycle/accounting application,
 Compliance controls for each significant provision of laws and
regulations, including budget controls for each relevant budget
restriction, and
 Operations controls for each operations control (1) relied on in
performing financial audit procedures or (2) selected for testing by the
audit team. The auditor also should understand performance
measures controls, but is not required to test them. However, the
auditor may decide to test them
Substantive procedures are performed in order to detect material
misstatements and include tests of detail of transactions, account
balances, and disclosures and substantive analytical procedures.
Substantive procedures are generally applicable to large volume of
transactions that tend to be predictable over time, which includes a
combination of tests of detail and analytical procedures. The auditor
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designs tests of details responsive to the assessed risks with the objective
of obtaining sufficient appropriate audit evidence to achieve the planned
level of assurance. In designing the tests of details, the extent of testing
is ordinarily thought of in terms of the sample size, which is affected by
the risk of material misstatement. However, the auditor may consider the
use of selective sampling such as selecting large or unusual items from a
population.
In addition to the above mentioned audit procedures, analytical
procedures may also be performed that would include analysis
significant ratios and trend, consideration of relationships among
elements of financial information and considering the relationship
between financial information and non-financial information. The auditor
will need to consider the testing of controls, over preparation of
information used in applying analytical procedures, accuracy and
reliability of information available.
Types of audits to be performed:



Financial audit
Compliance audit
Performance audit (if required)
System documentation:






Cash/bank payment and receipts system
Procurement of assets and other items
Payroll
Grant receipt and related expenditure
Transfers
Delegation of powers
V.
BUDGET ALLOCATION
A.
Current Expenditure
The total federal budget for current expenditure amounts to Rs.
1,382,727,000. Grant wise detail is as follows.
Grant No.
49
50
Particulars
Food, Agriculture and Livestock Division
Agriculture Research
301
Budget allocation
for current
expenditure (Rs.)
169,630,000
700,000,000
DG Audit – Federal Government
Audit Plan 2007 - 08
51
Other Expenditure of Food, Agriculture
and Livestock Division
Total
513,097,000
1,382,727,000
Function wise and object wise classification of expenditure under each
grant is as follows;
Grant No. 49: Food, Agriculture and Livestock Division (Rs.
169,630,000)
Account
Codes
Revised
Estimates
2006-07
Pak Rupees
Particulars
1. Functional Classification
042
Agriculture, Food, Irrigation, Forestry and
Fishing
2. Object Classification
A01
Employees Related Expenses
A03
Operating Expenses
A05
Grants subsidies and Write-off Loans
A06
Transfers
A09
Physical Assets
A13
Repairs and Maintenance
169,630,000
95,430,000
70,070,000
1,000,000
393,000
1,195,000
1,542,000
169,630,000
Grant No. 50: Agriculture Research (Rs. 700,000,000)
Account
Codes
Revised
Estimates
2006-07
Pak Rupees
Particulars
1. Functional Classification
042
Agriculture, Food, Irrigation, Forestry and
Fishing
2. Object Classification
A05
Grants, subsidies and Write-ff Loans
700,000,000
700,000,000
Grant No. 50: Other Expenditure of Food, Agriculture and Livestock
Division (Rs. 513,097,000)
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Chapter 18: Food Agriculture and Livestock Division
Account
Codes
Revised
Estimates
2006-07
Pak Rupees
Particulars
1. Functional Classification
042
Agriculture, Food, Irrigation, Forestry and
Fishing
2. Object Classification
A01
Employees Related Expenses
A03
Operating Expenses
A04
Employees Retirement Benefits
A05
Grants, subsidies and Write-ff Loans
A06
Transfers
A09
Physical Assets
A13
Repairs and Maintenance
513,097,000
302,469,000
132,759,000
10,350,000
28,592,000
740,000
26,669,000
11,518,000
513,097,000
The offices / projects selected for the audit are as follows:
DDO
Code
Name of the Offices/ Projects
ID1185
Pakistan
Council
Agriculture
ID1189
Food, Agriculture
Islamabad
and
Budget
appropriation
for current
expenditure in
FY 2006-07
Research
700 Million
Livestock,
117 Million
The sub offices carried out the audit of all the federal departments in the
respective provinces with focus on the significant audit areas.
a)
Significant audit risk areas:
We tried to integrate the approaches for financial and compliance audits
and simultaneously planned to perform performance audit so that
effective utilization of financial resources can be ensured. Further the
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DG Audit – Federal Government
Audit Plan 2007 - 08
audit approach is more directed towards system based audit to address
the system weaknesses.
As discussed in the earlier section the expenditure are broadly classified
in the current and development expenditure. We have focused more on
development expenditure as huge investment has been made in
development sector which if utilized efficiently will help the government
in achieving their goals. The brief description of the areas to be covered
but not limited to as follows:
Significant audit areas for current expenditure:
Current expenditure is recurring expenditure of the Ministry of Food,
Agriculture and Livestock affairs departments listed above. For the
purposes of the audit we have focused on the i) operating expenses and
the ii) purchase of physical assets of the departments selected for the
audit in particular and the rest will be audited in general.
i) Risks involved in operating expenses:
 Illegitimate payments
 Improper classification of expenses in the heads of accounts
 Improper mode of payment
 Improper allocation of expenses
Audit approach to address the risks involved in operating
expenses:
-
Illegitimate payments:
The risk could affect the management assertion regarding RIGHTS
and OBLIGATIONS.
Document the system for the sanction of expenditure and identify any
non compliance from general financial rules.
The expenses are compared against the budget allocations so that
excess especially in the utilities and general which includes
advertisement and miscellaneous can be critically analyzed.
Ensure that each payment is supported by the proper contract duly
approved and authorized by the competent authority.
Ensure that the payments are made against the schedule of
authorized expenditure, and the applicable laws and regulation.
-
Improper classification of the expenses in the heads of the
account
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Chapter 18: Food Agriculture and Livestock Division
The risk could effect the management
CLASSIFICATION and PRESENTATION.
assertion
regarding
Review the details of expenditure, select the sample from each major
classification and check the classification according to the new
accounting model.
-
Improper mode of payment.
The risk could effect the management assertion regarding EXISTENCE
and OCCURRENCE
Document the system recommended by the accounts manual and
check the compliance in the departments/division.
Verify on sample basis the expenditures from the bank statement.
Obtain the list of expenditure paid in cash and obtain their
justification.
-
Improper Allocation Of Expenses
The risk could effect the management assertion regarding VALUATION
and EXISTENCE
Ensure with focus on advertisement expenses and miscellaneous
whether the expenditure should be classified as capital expenditure or
revenue expenditure as detailed in the audit code and IPSAS.
ii) Risks involved in the purchase of physical assets:





Violation of PPRA rules
In adequate measurement
In complete records
In adequate utilization of resources
In adequate disclosure
Approaches to address risks involved in purchase of assets:
-
Violation of PPRA
This risk will affect the assertion of compliance with regulation and
inadequate disclosure of facts.
Document the system to call tenders and compare it with the bench
mark provided in the PPRA rules.
Inquire non-compliances
-
In adequate valuation
This risk will affect the assertion of valuation
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DG Audit – Federal Government
Audit Plan 2007 - 08
Check the useful life of the fixed asset and the depreciation rate
applied with the market information for similar assets.
Document the criteria for the recognition of the cost and compare it
with international standards.
-
Incomplete records
This risk could affect the assertion of EXISTENCE
Documents the system of recording the assets.
Document the internal control applied on recording the assets.
Check the items from records to ground and vice versa.
-
Inadequate utilization of resources
The risk will affect the assertion of Rights and Obligation.
Ensure that the assets are maintained properly
Ensure that assets are used for the purposes it is acquired.
Ensure that assets are in the name of the project/department.
Ensure that assets are insured or not.
Ensure that warranty services are acquired when required during the
warranty period.
-
Inadequate disclosure
This will affect the assertion of classification and presentation and
disclosure.
Select a sample and ensure that the items are properly disclosed in
the correct account as per the classification of New accounting model.
Ensure that the assets are disclosed in accordance with financial
reporting manual, and IPSAS.
General audit approach:





Prepare analytical procedures and Investigate where actual are more
than budget appropriation.
Investigate transfer payments to sub-offices and there utilizations.
Document the system of revenue recording, from source document till
deposit in the bank account.
Ensure that the procurement of the contractor as per PPRA RULES
Circularize confirmation for loan amount to the local offices of the
donor agencies and obtain reconciliations
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Chapter 18: Food Agriculture and Livestock Division
B.
Development Expenditure
The total federal budget for development expenditure amounts to Rs.
12,385,502,000. Grant wise detail is as follows.
Grant No.
144
145
Particulars
Food, Agriculture and Livestock Division
Agriculture Research
Total
Budget allocation
for development
expenditure (Rs.)
11,952,109,000
433,393,000
12,385,502,000
Function wise and object wise classification of expenditure under each
grant is as follows;
Grant No. 144: Food, Agriculture and Livestock Division (Rs.
11,952,109,000)
Account
Codes
Revised
Estimates
2006-07
Pak Rupees
Particulars
1. Functional Classification
042
Agriculture, Food, Irrigation, Forestry and
Fishing
2. Object Classification
A01
Employees Related Expenses
A02
Project Pre-investment Analysis
A03
Operating Expenses
A04
Employees Retirement Benefits
A05
Grants subsidies and Write-off Loans
A06
Transfers
A09
Physical Assets
A12
Civil Works
A13
Repairs and Maintenance
11,952,109,000
238,672,000
982,000
472,859,000
692,000
10,954,982,000
5,420,000
229,415,000
33,048,000
16,039,000
11,952,109,000
Grant No. 145: Agriculture Research (Rs. 433,393,000)
Account
Codes
Revised
Estimates
2006-07
Pak Rupees
Particulars
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DG Audit – Federal Government
Audit Plan 2007 - 08
1. Functional Classification
042
Agriculture, Food, Irrigation, Forestry and
Fishing
2. Object Classification
A05
Grants, subsidies and Write-ff Loans
433,393,000
433,393,000
The development projects selected for audit during year under review
includes;
DDO
Budget
appropriation
for development
expenditure in
FY 2006-07
Name of the Offices/ Projects
Code
ID2377
1National
Program me for improvement
of Water resources in Pakistan
8,500 Million
ID8073
Agri-business
development
diversification project
697.8 Million
1Includes
a)
and
77.6% employees’ related expenses
Significant audit risk areas:
The significant areas are the same as that of non-development
expenditure; however certain additional procedure will be applied for the
purposes of the audit, discussed below;
Internal control assessment:


Document and analyze the system of internal control in the light of
internal control questionnaire provided in the FAM and
Analyze the delegation of powers authorized by the ministry to the key
officials and the powers actually exercised.
Project objectives:


Obtain PC-1 and check the efficiency of the project with respect to
time and resources.
Discuss the modes of viability/sustainability of the projects.
Budget utilization:

Compare the budget appropriation with actual utilization.
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Chapter 18: Food Agriculture and Livestock Division


Investigate where budgets are not utilized fully along with its financial
impact.
Compare expenditure statement with budget allocation and ensure
that expenditures are in line with appropriations only.
Cash/bank balances:



VI.
ISSUES HIGHLIGHTED IN PREVIOUS YEARS











VII.
Confirm bank balances for loan account with the local offices of the
donor and investigate differences and financial implications if any.
Obtain reconciliation with
Document the imprest system for cash handling and identify any
irregularities.
Excess expenditure
Non submission of adjustment accounts by DG Agriculture Extension
NWFP
Non disclosure of receipts in the budget estimates
Long outstanding pension cases
Unauthorized retention of receipts and expenditure incurred out of it
Unauthorized retention of public funds
Non maintenance of books of account and non reconciliation of
receipts.
Irregular expenditure on procurement of rejected instruments
Irregular transfer of funds
Loss due to defective planning in respect of utilization of Oil Palm
Fresh Fruit Bunches
Wasteful expenditure
TIME SCHEDULE
Planning
10 days
Execution – Fieldwork
18 days
Reporting
4 days
Holding DAC Meeting
28 days
Total
56 days
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DG Audit – Federal Government
Audit Plan 2007 - 08
Particulars
Duration Start Date
Finish Date
56 days
28-Nov-07
31-Jan-08
Permanent File
3 days
28-Nov-07
30-Nov-07
Planning File
3 days
1-Dec-07
4-Dec-07
Execution
18 days
5-Dec-07
25-Dec-07
Pakistan Agriculture Research Council
National Agriculture Research Council
6 days
6 days
5-Dec-07
12-Dec-07
11-Dec-07
18-Dec-07
Agri-business development and
diversification project
6 days
19-Dec-07
25-Dec-07
Reporting
4 days
26-Dec-07
29-Dec-07
Prepare AIR
2 days
26-Dec-07
27-Dec-07
Send AIR to PAO
2 days
28-Dec-07
29-Dec-07
DAC
28 days
31-Dec-07
31-Jan-08
Hold DAC meeting
21 days
31-Dec-07
23-Jan-08
Sign Minutes of meeting
1 day
24-Jan-08
24-Jan-08
Complete Working Papers
2 days
25-Jan-08
26-Jan-08
Scan WP Evidence
2 days
28-Jan-08
29-Jan-08
Finalize Audit Report
2 days
30-Jan-08
31-Jan-08
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Chapter 18: Food Agriculture and Livestock Division
Annexure A
Ministry of Food, Agriculture and Livestock
Organization structure











Addl. Secretary (Additional Secretary)
JS (A&E) Joint Secretary (Administration & Establishment)
JS (FOOD) Joint Secretary (Food)
JS (P) Joint Secretary (Plan)
DS (AI) Deputy Secretary (Agriculture Inputs)
DS (FOOD) Deputy Secretary (Food)
DS (CROPS) Deputy Secretary (Crops)
DS (E) Deputy Secretary (Establishment)
DS (FBC) Deputy Secretary (Finance, Budget and Coordination)
DS (IC) Deputy Secretary (International Coordination)
DS (L) Deputy Secretary (Livestock)
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Audit Plan 2007 - 08









DS (P) Deputy Secretary (Plan)
DA (P) Deputy Advisor (Plan)
SO(LIV) Section Officer (Livestock)
SO(FISH) Section Officer (Fish)
SO(E-I) Section Officer (Establishment-I)
SO(E-II) Section Officer (Establishment-II)
SO(GA) Section Officer (General)
SO(Council/Admin. Cord.) Section Officer (Council, Administration Coordination)
SO(Crops) Section Officer (Crops)
312