Chapter 15
Ministry of Education
Audit Period
Audit Year 2007-08
Auditable Expenditure
Grant No.
Particulars
Rupees
Current/ Non-Development Expenditure
29
30
31
32
Education Division
465,944,000
Higher Education Commission
14,332,521,000
Education
612,659,000
Federal
Government
Educational
1,917,731,000
Institutions in the Capital and Federal
areas
17,328,855,000
Development Expenditure
138
Education Division
4,418,015,000
Total
21,746,870,000
Audit Formations
 Main secretariat

Federal Directorate of Education

Federal Government Educational Institutions in the Capital and
Federally Administer areas

University of the Punjab

University of Karachi

Promotion of research in Universities

University of Sindh, Jamshoro
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
University of Engineering and Technology, Lahore

University of the Peshawar

Inter University Academic Activities

University of Agriculture, Faisalabad

Comsat Institute of Information Technology, Islamabad

Basic Education Community Schools

Madrassah Reforms

Education for all
Audit Team
S.No.
1.
Name
Dr. Akmal Minallah
2.
Nazar Rauf Rathore
3.
Muhammad Adnan
4.
Sheraz Hassan
Hassan Kazmi
5.
Sanual Hassib
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
Audit Officer Audit execution,
Preparation of AIRs & draft
audit report
Update audit permanent file
Assistant
Audit execution,
Audit Officer Prepare audit working papers
Time Schedule
Ministry of Education
From 3 July 2007 to 18 January 2008
Higher Education Commission
From 16 July 2007 to 3 December 2007
(For details refer page 218)
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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 education are:
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-
-
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:
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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 Ministry of Education have to 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:

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

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 Education sector in Pakistan
Education is a categorical imperative for individual, social and national
development that should enable all individuals to reach their maximum
human potential. The system should produce responsible, enlightened
citizens to integrate Pakistan in the global framework of human centered
economic development.
B.
Background of the Higher Education Commission
Higher Education Commission (“HEC”) was setup under the President
Ordinance in September 2002 to facilitate the development of indigenous
universities to be world-class centers of education, research and
development. Through facilitating this process, the HEC intends to play
its part in spearheading the building of a knowledge-based economy in
Pakistan.
HEC has succeeded the old Universities Grants Commission with
enhanced powers and new vision.
Since its establishment, the Higher Education Commission has
undertaken a systematic process of implementation of the five-year
agenda for reform outlined in the HEC Medium Term Development
Framework (MTDF), in which Access, Quality and Relevance have been
identified as the key challenges faced by the sector. To address these
challenges a comprehensive strategy has been defined that identifies the
core strategic aims for reform as (i) Faculty Development, (ii) Improving
Access, (iii) Excellence in Learning and Research, and (iv) Relevance to
National Priorities. These strategic aims are supported by well-integrated
cross-cutting themes for developing Leadership, Governance and
Management, enhancing Quality Assessment and Accreditation and
Physical and Technological Infrastructure Development.
C.
Background of the Ministry of education
Under the Rules of Business 1973 as amended from time to time,
Ministry of Education is responsible for the overall development of
educational infrastructure and policy planning and implementation.
The understanding of the ministry is obtained in lines provided in the
form PF-I till PF-IX of the audit working paper kit, which includes,
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Organizational Structure
The organizational structures of the ministry and Higher Education
Commission are annexed as Annexure A to the chapter.
Principal Address
Block D, Pak-Secretariat, Islamabad
D.
Status of the Entity and its Core Operations
a)
Status of the entity
Ministry of education 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 to,
 Development and coordination of national policies, plans and
programs in education,
 Development of curricula and textbooks, National Book Foundation,
 Establishment and maintenance of national educational institutions
 Organizations and disbursement of grant-in-aid to them,
 Development of instructional technology, promotion and coordination
of educational research,
 External examination and equivalence of degrees and diplomas, etc
Pakistan is committed to achieving the Millennium Development Goals as
the national agenda for development as well as improving education
condition. Education, health, and poverty alleviation are Government
priorities.
There is a full commitment at policy level about the importance of
investing in education 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 Basic Education Community Schools,
Madrassah reforms, Education for all and Capacity Building of Teachers
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Chapter 15: Ministry of Education
Training Institutes of Ministry of Education and training of elementary
schools teachers in Punjab program. These programs with current and
future major interventions should help to improve literacy in boys and
girls and contribute towards the achievement of the MDGs.
Investment in education though increased by 12%, in 2006-07 from
previous years, yet it is still only 0.68% of the total federal development
program. The government obtains foreign loan/aid also to invest in the
education sector. Federal MoE is the key functionary which plays a
leading role in regulating aid flow in the education sector. The poverty
reduction strategy paper (PRSP) was adopted as a basic document for all
aid efforts; donors channel their resources towards common identified
objectives with government. The common identified objectives are:
 Increased coverage of education facility
 Reduction of inequalities
 And achieving millennium development goals, that is increase literacy
Being the priority agenda of the government a lot can be achieved in
improving literacy due to non-availability basic education facilities if the
commitment from the bureaucracy is there.
E.
SWOT analysis
Before considering the risk areas that are at present hindering the
government in fully implementing the millennium development
objectives in education 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 education
support

Vesting of Powers through Legislation
Devolution of the power through Ministry of Education 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
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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;
 Un-unified course irrespective of sex, religion and cast
 Lack of experienced Project Implementers
 Lack of co-ordination within departments and with outside 3rd parties
 Lack of master trainers and qualified educationists
Threats
 Extremist attacks on the educational centers
 Religious leaders may hinder the activities
 Change of government may suspend the development projects
undertaken by the present government.
 Funds might not be utilized for the purposes to achieve the targets.
 Qualified staff leaves the organization
Opportunities





F.
Development of virtual education institutions
Online libraries
Registration of new institutes online using web base technology
Coordination with International organizations
Have tremendous growth opportunities in education sector
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
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
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Chapter 15: Ministry of Education
Social factors
Cultural issues can lead to gender bias in some areas resulting in non
availability /non willingness for females in enrolment into education
programs
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 education budget hence resulting in
curtailment of MoE activities
 High rates of inflation can lead to high rates of education resulting in
low enrolments in higher education programs
Climatic disaster
 Natural disaster such as earth quake, flood
 Sudden change in weather patterns
G.
Intergovernmental Relationship:
Functionally ministry consists of one main division along with various
line departments/suboffices. The Ministry of Education is responsible for
matters concerning National Planning and Coordination in the field of
Education.
Departments:
The Departments attached/sub-ordinate with the ministry of education
are ;








Department of libraries Islamabad/ Karachi
Federal Directorate of Education, Islamabad
Monitoring and Evaluation Cell
Revision of Education Policy
Discretionary grant by the minister of the state for education
International Federation of Library association, Hague
Contribution & subscription to International ISBN agency London, UK
Office of the permanent representative to UNESCO, Paris etc
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Various programs are initiated by the government under each
division/department with a sharper focus on poor and unprivileged
segments of the society.
H.
Accounting System of the Ministry:

Ministry of education 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
Code
Cost centers
093
Tertiary Education Affairs and services
095
Subsidiary Services to Education
096
Administration

For more specific accounting each department and projects to further
detailed level can be classified as cost centre.

Each cost centre is further divided into cost elements, the major
classification of which is detailed below;
Account
Code
A01
Cost elements
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
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
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 II.
through
III.
RISK ASSESSMENT
A.
General Risk Assessment Procedures
the
following
to
the
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;



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
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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;
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;
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


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.
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B.
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

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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;
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;
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
Imposition of unwanted responsibilities
administrations or beneficiaries;
upon
organizations,
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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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;
Utilization of obsolete information technology systems;
6) Inherent risk factors associated with the audited entity’s
management policies and practices

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

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;
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C.
Specific Audit Risks
 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
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
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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.
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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.
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
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Chapter 15: Ministry of Education
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.
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.
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


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
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.
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Chapter 15: Ministry of Education
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.
17,328,855,000. Grant wise detail is as follows:
Grant
No.
29
30
31
32
Particulars
Education Division
Higher Education Commission
Education
Federal Government Educational Institutions
in the Capital and Federal areas
Total
Budget
allocation for
current
expenditure
(Rs.)
465,944,000
14,332,521,000
612,659,000
1,917,731,000
17,328,855,000
Function wise and object wise classification of expenditure under each
grant is as follows;
Grant No. 29: Education Division (Rs. 465,944,000)
Account
Codes
Revised
Estimates
2006-07
Pak Rupees
Particulars
1. Functional Classification
095
Subsidiary Services to Education
096
Administration
209
79,000
465,865,000
465,944,000
DG Audit – Federal Government
Audit Plan 2007 - 08
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
A13
Repairs and Maintenance
161,577,000
50,000
289,232,000
1,600,000
1,000,000
735,000
5,970,000
5,780,000
465,944,000
Grant No. 30: Higher Education Commission (Rs. 14,332,521,000)
Account
Codes
Revised estimates
2006-07
Pak Rupees
Particulars
1. Functional Classification
093
Subsidiary Services to Education
2. Object Classification
A03
Operating Expenses
A05
Grants subsidies and Write-off Loans
14,332,521,000
1,238,004,000
13,094,517,000
14,332,521,000
Grant No. 31: Education (Rs. 612,659,000)
Account
Codes
Budget
appropriation
in FY 2006-07
Pak Rupees
Particulars
1. Functional Classification
092
Secondary Education Affairs and
Services
093
Territory Education Affairs and Services
097
Education Affairs and Services not
elsewhere classified
34,295,000
324,582,000
253,782,000
612,659,000
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
A13
Repairs and Maintenance
210
100,735,000
400,000
56,963,000
100,000
412,142,000
21,653,000
12,381,000
8,285,000
612,659,000
Chapter 15: Ministry of Education
Grant No. 32: Federal Government Educational Institutions in the
Capital and Federal areas (Rs. 1,917,731,000)
Account
Codes
Budget
appropriation
in FY 2006-07
Pak Rupees
Particulars
1. Functional Classification
091
Pre-Primary and Primary Education
Affairs and Services
092
Secondary Education Affairs and Services
093
Territory Education Affairs and Services
096
Administration
2. Object Classification
A01
Employees Related Expenses
A03
Operating Expenses
A06
Transfers
A09
Physical Assets
A13
Repairs and Maintenance
472,114,000
785,216,000
655,613,000
4,788,000
1,917,731,000
1,679,069,000
114,271,000
8,839,000
50,870,000
64,682,000
1,917,731,000
The offices / projects selected for the audit are as follows:
1. Ministry of Education
DDO
Code
Name of the Offices/ Projects
ID0314
ID0365
DD032
Main secretariat
Federal Directorate of Education
Federal Government Educational
Institutions in the Capital and
Federally Administer areas
Budget
appropriation for
current
expenditure in
FY 2006-07
115.9 Million
213.8 Million
*1,917 Million
*Includes 87.5% employees related expenses

The sub offices carried out the audit of all the federal departments in
the respective provinces with focus on the significant audit areas.
211
DG Audit – Federal Government
Audit Plan 2007 - 08
2. Higher Education Commission
DDO
Code
ID2157
ID2161
ID2222
ID2162
ID2194
ID2195
ID2171
ID2195
ID2188
Name of the Offices/ Projects
University of the Punjab
University of Karachi
Promotion of research in Universities
University of Sindh, Jamshoro
University of Engineering and
Technology, Lahore
University of the Peshawar
Inter University Academic Activities
University of Agriculture, Faisalabad
Comsat Institute of Information
Technology, Islamabad
Total
Budget
appropriation
for current
expenditure in
FY 2006-07
902.6 Million
765.4 Million
705 Million
647 Million
622 Million
597.7
590
572.1
238.8
Million
Million
Million
Million
5,640.68 Million
The sub offices carried out the audit of all the federal departments in
the respective provinces with focus on the significant audit areas.
C.
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
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 be as follows:
Current expenditure is recurring expenditure of the
Education departments listed above. For the purposes of
have focused on the i) operating expenses and the ii)
physical assets of the departments selected for the audit
and the rest will be audited in general.
212
Ministry of
the audit we
purchase of
in particular
Chapter 15: Ministry of Education
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
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
213
DG Audit – Federal Government
Audit Plan 2007 - 08
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 purchase of assets
 Violation of PPRA rules
 Inadequate valuation
 Incomplete records
 Inadequate utilization of resources
 Inadequate disclosures
Approaches to address risks involved in purchase of assets:
- Violation of PPRA rules
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
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.
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Chapter 15: Ministry of Education
-
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
B.
Development Expenditure
The total federal budget for development expenditure amounts to
Rs.4,418,015,000. Grant wise detail is as follows:
Grant No.
138
Particulars
Education Division
Total
Budget allocation
for development
expenditure (Rs.)
4,418,015,000
4,418,015,000
Function wise and object wise classification of expenditure under each
grant is as follows;
Account
Codes
Revised
Estimates
2006-07
Pak Rupees
Particulars
1. Functional Classification
091
Pre-Primary and Primary Educating
Affairs and Services
092
Secondary Education Affairs and Services
093
Territory Education Affairs and Services
095
Subsidiary Services to Education
097
Education Affairs and Services not
elsewhere classified
58,189,000
218,537,000
1,306,820,000
383,136,000
2,451,333,000
4,418,015,000
215
DG Audit – Federal Government
Audit Plan 2007 - 08
2. Object Classification
A01
Employees Related Expenses
A02
Operating Expenses
A03
Grants subsidies and Write-off Loans
A06
Transfers
A09
Physical Assets
A12
Civil Works
A13
Repairs and Maintenance
11,258,000
2,229,602,000
798,627,000
20,660,000
88,113,000
1,247,403,000
22,352,000
4,418,015,000
The development projects selected for audit during year under review
includes;
DDO Code
Name of the Offices/ Projects
ID3185
1Basic
ID0292
1Madrassah
ID0346
Education for all
Education Community Schools
Reforms
Budget
appropriation for
development
expenditure in
FY 2006-07
705 Million
500 Million
1,378 Million
1Apart
from normal audit procedures, performance audit of these
projects will also be conducted
VI.
ISSUES HIGHLIGHTED IN PREVIOUS YEARS
A.
Ministry of Education
 Unauthorized expenditure
 Irregular payment to supporting staff
 Irregular expenditure without tenders
 Unauthorized investment by Federal Government Colleges
 Irregular expenditure on construction work
 Unauthorized collection on account of central admission test and
expenditure there from
 Irregular expenditure
 Non accountal of funds
 Unauthorized expenditure out of Hostel Fund
 Non approval of Education Code by Ministry of Finance
 Unauthorized running of second shift and irregular retention /
utilization of Government money
 Non recovery of money from teachers
216
Chapter 15: Ministry of Education























B.
Non approval of fee structure from Ministry of Finance
Unauthorized payment of medical allowance and house rent
allowance and encashment leave
Irregular expenditure on repair and maintenance
Unauthorized expenditure over and above PC-1 allocation
Unauthorized investment
Excess payment to contractor
Non disclosure of receipts
Irregular retention of government receipts
Loss due to withdrawal of public fund by submission of bogus bill
Non-surrendering of unspent balances
Unauthorized transfer of funds from development grant to non
development grant
Non recovery of 5% house rent charges
Misappropriation in Federal Urdu University
Non recovery of funds on account of violation of surety bond
Unauthorized payment of salaries out of Student Fund
Unauthorized retention and utilization of bus fee
Collection of tuition fee in violation of government policy
Double charging of fee and extra payment to teaching staff
Irregular authorization for construction of canteen
Unauthorized expenditure on payment of house rent ceiling out of
Student Fund
Non recovery of funds from scholarship holders
Unauthorized transfer of funds to PWD
Unauthorized appointment in contraventions of NCA rules
Higher Education Commission







Release of grant-in-aid without obtaining audited statements
Non adjustment of funds released for sport activities
Non-revalidation or surrender of closing balance under development
and non-development grants
Non recovery of amount paid by HEC as share of Connectivity
Charges on behalf of Universities
Transfer of funds from recurring grant to development grant and
unnecessary retention
Failure to collect funds on account of difference of profit
Non refund of unspent balances of closed projects
217
DG Audit – Federal Government
Audit Plan 2007 - 08







Un-authorized opening of Foreign Currency Bank Account
Unauthorized retention of public funds
Unauthorized expenditure not provided in PC-I
Recovery on account of irregular appointment of Liaison Officer
Manipulation in tendering process
Mismanagement in dealing with expatriate professors
Fraudulent drawl of funds
VII.
Time Schedule
A.
Ministry of Education
Planning
10 days
Execution – Fieldwork
122 days
Reporting
11 days
Holding DAC Meeting
28 days
Total
Particulars
172 days
Duration Start Date
Finish Date
172 days
3-Jul-07
18-Jan-08
Permanent File
5 days
3-Jul-07
7-Jul-07
Planning File
5 days
9-Aug-07
14-Aug-07
Execution
122 days
16-Jul-07
4-Dec-07
Main Ministry
6 days
16-Jul-07
21-Jul-07
FBISE
6 days
23-Jul-07
28-Jul-07
Federal Directorate of Education
10 days
30-Jul-07
9-Aug-07
Basic Education Community Schools
20 days
10-Aug-07
1-Sep-07
Madrassah Reforms
20 days
3-Sep-07
25-Sep-07
Education for all
20 days
26-Sep-07
18-Oct-07
Academy of Letters
6 days
19-Oct-07
25-Oct-07
Interboard committee of chairman
6 days
26-Oct-07
1-Nov-07
NISDE
6 days
2-Nov-07
8-Nov-07
Pakistan Academy of Science
3 days
9-Nov-07
12-Nov-07
Polytechnic Instutute for Women
4 days
13-Nov-07
16-Nov-07
Department of Library
4 days
17-Nov-07
21-Nov-07
Pakistan National Council for
UNESCO
4 days
22-Nov-07
26-Nov-07
218
Chapter 15: Ministry of Education
Particulars
Duration Start Date
Technical panel on Teacher's
Education
3 days
27-Nov-07
29-Nov-07
Academy of education - Planning
management
4 days
30-Nov-07
4-Dec-07
Reporting
11 days
5-Dec-07
17-Dec-07
Prepare AIR
8 days
5-Dec-07
13-Dec-07
Send AIR to PAO
3 days
14-Dec-07
17-Dec-07
DAC
28 days
18-Dec-07
18-Jan-08
Hold DAC meeting
21 days
18-Dec-07
10-Jan-08
Sign Minutes of meeting
1 day
11-Jan-08
11-Jan-08
Complete Working Papers
2 days
12-Jan-08
14-Jan-08
Scan WP Evidence
2 days
15-Jan-08
16-Jan-08
Finalize Audit Report
2 days
17-Jan-08
18-Jan-08
B.
Finish Date
Higher Education Commission
Planning
10 days
Execution – Fieldwork
76 days
Reporting
7 days
Holding DAC Meeting
28 days
Total
Particulars
121 days
Duration Start Date
Finish Date
121 days
16-Jul-07
3-Dec-07
Permanent File
5 days
16-Jul-07
20-Jul-07
Planning File
5 days
21-Jul-07
26-Jul-07
Execution
76 days
27-Jul-07
23-Oct-07
Main
10 days
27-Jul-07
7-Aug-07
Promotion of research in Universities
10 days
8-Aug-07
18-Aug-07
Inter University Academic Activities
10 days
20-Aug-07
30-Aug-07
Comsat Institute of Information
Technology, Islamabad
10 days
31-Aug-07
11-Sep-07
AIOU
6 days
12-Sep-07
18-Sep-07
QAU
6 days
19-Sep-07
25-Sep-07
Int'l Islamic University
6 days
26-Sep-07
2-Oct-07
NUML
6 days
3-Oct-07
9-Oct-07
219
DG Audit – Federal Government
Audit Plan 2007 - 08
Particulars
Duration Start Date
Karakoram University
6 days
10-Oct-07
16-Oct-07
Federal Urdu University
6 days
17-Oct-07
23-Oct-07
Reporting
7 days
24-Oct-07
31-Oct-07
Prepare AIR
5 days
24-Oct-07
29-Oct-07
Send AIR to PAO
2 days
30-Oct-07
31-Oct-07
DAC
28 days
1-Nov-07
3-Dec-07
Hold DAC meeting
21 days
1-Nov-07
24-Nov-07
Sign Minutes of meeting
1 day
26-Nov-07
26-Nov-07
Complete Working Papers
2 days
27-Nov-07
28-Nov-07
Scan WP Evidence
2 days
29-Nov-07
30-Nov-07
Finalize Audit Report
2 days
1-Dec-07
3-Dec-07
220
Finish Date
Chapter 15: Ministry of Education
Annexure A
Ministry of Education
Organization structure
Legend:
PMU :
Project Monitoring Unit
PESR : President’s Education Sector Reforms
JS
: Joint Secretary
JEA
: Joint Educational Adviser
221