Chapter 20
Information Technology and
Telecom Division
Audit Period
Audit Year 2007-08
Auditable Expenditure
Grant No.
Particulars
Current/ Non-Development Expenditure
70
Information Technology and
Telecommunication Division
Rupees
1,219,121,000
1,219,121,000
Development Expenditure
148
Information Technology and
Telecommunication Division
Total
1,667,507,000
2,886,628,000
Audit Formations

Main secretariat, Islamabad

Electronic Government Directorate

Federal Government – Data center

E-services for CDA

E-services for Food and Agriculture sector

E-services for Islamabad Police

IT/ computer lab project, machining project with Govt. of Punjab
341
DG Audit – Federal Government
Audit Plan 2007 - 08
Audit Team
S.No.
1.
Name
Dr. Akmal Minallah
2.
Nazar Rauf Rathore
3.
Muhammad Adnan
4.
Imran Mukhtar
5.
Liaquat Ali
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
From 27 July 2007 to 15 October 2007
(For details refer page 365 )
342
Chapter 20: Information Technology and Telecom Division
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.
343
DG Audit – Federal Government
Audit Plan 2007 - 08
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 Ministry of Information Technology 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
344
Chapter 20: Information Technology and Telecom Division
II.
SIGNIFICANCE AND UNDERSTANDING OF THE MINISTRY
A.
Significant of Information Technology sector in Pakistan
Information technology (IT) has assumed unprecedented importance in
the global economic arena. In Pakistan, the present Government is
according a very high priority to this sector. One of the prerequisites for
ensuring sustained growth of the industry, nay the economy, is the
provision of a definite framework consisting of policy, legislative,
financial, and operational guidelines, which can provide a stable
umbrella for growth. Thus, the government, as the main facilitator,
enabler, and promoter of the IT sector, has evolved an effective national
IT Policy and Action Plan that clearly caters to the needs of nurturing the
industry and is responsive to the dynamic forces of change that can
affect its future growth.
B.
Understanding of the Ministry of Information Technology
The Ministry of Information Technology (MoIT) is the national focal
Ministry and enabling arm of the Government of Pakistan for planning
coordinating and directing efforts to initiate and launch Information
Technology and Telecommunications programs and projects aimed at
economic development of the country.
Organizational Structure
The organizational structure of the ministry is annexed as Annexure A to
the chapter.
Principal Address
Ministry of Information Technology
Pak. Secretariat, Islamabad
C.
Status of the Entity and its Core Operations
a)
Status of the entity
Ministry of Information Technology 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.
345
DG Audit – Federal Government
Audit Plan 2007 - 08
b)
Core Operational Activity
The core operational activities of the ministry are,
 Preparation of an over all integrated Plan as well as formulation of
policy for the development and improvement of Information
Technology including infrastructure in Pakistan.
 Cooperation with the provincial Governments, autonomous bodies,
private sector, international organizations and foreign countries in
respect of information Technology.
 Promotion of information Technology applications.
 Providing guidelines for the standardization of software for use with in
the Government.
 Matters relating to Pakistan Computer Bureau, Pakistan Software
Export Board and the National Information Technology Commission.
 Planning, Policy making and legislation covering all aspects of
Telecommunications excluding radio and television.
 All matters relating to PTCL, FAB, NTC, TIP, CTRL, CTI, Telecom
Foundation and the Special Communication Organization and NRTC
 All matters relating to Pakistan Computer Bureau and Petroman.
There is a full commitment at policy level about the importance of
investing in Information Technology 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 Federal Government data Center, E-services for
CDA, Food & Agriculture Center and Islamabad police, IT/ Computer
series for teachers lab project. These programs with current and future
major interventions should help to improve general uplift of masses.
Investment in Information Technology stood at only 0.083% of the total
federal development program. The government obtains foreign loan/aid
also to invest in the Information Technology sector. Federal Ministry of
Information Technology is the key functionary which plays a leading role
in regulating aid flow in the Information Technology sector. The common
identified objectives are:
o Preparation of an overall integrated plan as well s formulation of the
policy for the development and improvement of Information
Technology including infrastructure
o Human resource development in the field of Information Technology.
346
Chapter 20: Information Technology and Telecom Division
o Promotion of IT applications
o Providing guidelines for the standardization of software and electronic
governance within the Government
o Planning and policy making and legislation covering all aspects of
telecommunications Excluding radio and television.
Being the priority agenda of the government a lot can be achieved in
Information Technology due to its far-reaching impact on the society at
large, 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 Information
Technology sector, the strength/opportunities available for its foster
growth and achieving objectives are discussed below;
Strengths:
 Heavy investments from international organizations
International investment companies are investments heavy amounts
in IT and telecom sectors
 Latest technology
International companies are bringing latest technologies in Pakistan
like 3G, television broadcasting on mobiles, internet on mobiles.
 Full financial support from Federal Government
Federal Government provides full financial support to the Information
Technology support
 Vesting of Powers through Legislation
Devolution of the power through Ministry of Information Technology
at all levels of government, that is, federal, provincial and local
government level.
 Availability of large infrastructure
Federal, provincial and local governments provide large infrastructure
to the ministry
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 implementation of applicable laws
 Lack of trained staff
347
DG Audit – Federal Government
Audit Plan 2007 - 08
Threats:







Cyber crimes
Threat of hackers
Extremist attacks on IT installations
Religious forces may be hinder the activities
Funds might not be utilized for the purposes to achieve the targets.
Qualified staff may leaves the organization
Change of government may suspend the development projects
undertaken by the present government.
Opportunities:
 Mobile banking
 Use of Wireless technologies
 Co-ordination with International Organizations for bringing home new
technologies
 Implementation of applicable laws in true jist
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
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/ families in enrolment into
programs/ activities
Political factors:
 Change of government may abandon present programs
348
Chapter 20: Information Technology and Telecom Division
 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 Information Technology budget hence
resulting in curtailment of Information Technology activities
 High rates of inflation can lead to high cost of Information Technology
resulting in low activities
Climatic disaster:
 Natural disaster such as earth quake, flood, light-striking, wind
storms
 Sudden change in weather patterns
F.
Intergovernmental Relationship:
Functionally ministry consists of one main division along with various
line departments/suboffices. The Ministry of Information Technology is
responsible for matters concerning National Planning and Coordination
in the field of Information Technology.
Departments:
The Departments attached
Information Technology are;
/sub-ordinate
with
the
ministry
 Carrier Telephone Industries (CTI)
 Electronic Government Directorate (EGD)
 National Radio Telecommunication Corporation (NRTC)
 National Telecommunication Corporation (NTC)
 Pakistan Computer Bureau (PCB)
 Pakistan Software Export Board (PSEB)
 Pakistan Telecommunications Company Limited (PTCL)
 Pakistan Telecommunications Mobile Limited (PTML - Ufone)
 Paknet
 Special Communication Organization (SCO)
 Telecom Foundation (TF)
 Virtual University (VU)
349
of
DG Audit – Federal Government
Audit Plan 2007 - 08
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 Information Technology 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
016
Basic research
019
General Public Services
045
Construction and Communication
046
Communications
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
A02
A03
A04
A05
A06
A09
A13
Cost elements
Employee related expenses
Project pre-investment analysis
Operating expenses
Employees retirement benefits
Grants subsidies and write-off loans
Transfers
Physical assets
Repairs and maintenance
350
Chapter 20: Information Technology and Telecom Division

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.
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
Changes in operating environment
Corporate restructuring
Discussions with the management regarding any internal control
weakness, frauds and irregularities identified earlier.
351
DG Audit – Federal Government
Audit Plan 2007 - 08













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;




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


Complexity of programs;
Complex, unusual or high value transactions;
352
Chapter 20: Information Technology and Telecom Division






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;
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






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;
353
DG Audit – Federal Government
Audit Plan 2007 - 08
4) Inherent risk factors associated with the economic or technical
circumstances





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






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






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;
354
Chapter 20: Information Technology and Telecom Division
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
selected have been mentioned individually and the areas to be focused
upon are also mentioned.
355
DG Audit – Federal Government
Audit Plan 2007 - 08
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.
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
356
Chapter 20: Information Technology and Telecom Division
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.
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.
357
DG Audit – Federal Government
Audit Plan 2007 - 08
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.
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
358
Chapter 20: Information Technology and Telecom Division



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.
1,219,121,000. Grant wise detail is as follows:
Grant No.
70
Particulars
Information Technology and
Telecommunication Division
Total
Budget allocation
for current
expenditure (Rs.)
1,219,121,000
1,219,121,000
Function wise and object wise classification of expenditure under each
grant is as follows;
Grant No. 70: Information Technology and Telecommunication
Division (Rs. 1,219,121,000)
Account
Codes
Revised
Estimates
2006-07
Pak Rupees
Particulars
1. Functional Classification
016
Basic Research
019
General Public Services not elsewhere
defined
045
Construction and Transport
046
Communications
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
359
8,300,000
175,401,000
35,420,000
1,000,000,000
1,219,121,000
72,871,000
1,092,821,000
44,720,000
560,000
5,200,000
2,949,000
1,219,121,000
DG Audit – Federal Government
Audit Plan 2007 - 08
Departments selected for the audit are:
DDO
Code
Name of the Offices/ Projects
ID1892
Main secretariat, Islamabad
ID1894
Electronic Government Directorate
Budget
appropriation for
current
expenditure in FY
2006-07
108.3 Million
36 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
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 are as follows:
Major audit areas for current expenditure:
Current expenditure is recurring expenditure of the Ministry
Information Technology departments listed above. For the purposes
the audit we have focused on the i) operating expenses and the
purchase of physical assets of the departments selected for the audit
particular and the rest will be audited in general.
of
of
ii)
in
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:
360
Chapter 20: Information Technology and Telecom Division
-
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
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
361
DG Audit – Federal Government
Audit Plan 2007 - 08

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
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.
362
Chapter 20: Information Technology and Telecom Division
General audit approach:





B.
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
Development Expenditure
The development budget for the year 2006-07 is Rs. 1,667.5 Million.
Special Communication Organization consists of Rs 1,032.97 Million out
of total development expenditure mentioned above.
The total federal budget for development expenditure amounts to Rs.
1,219,121,000. Grant wise detail is as follows:
Grant No.
148
Particulars
Information Technology and
Telecommunication Division
Total
Budget allocation
for development
expenditure (Rs.)
1,667,507,000
1,667,507,000
Function wise and object wise classification of expenditure under each
grant is as follows;
Grant No. 148: Information Technology and Telecommunication
Division (Rs. 1,667,507,000)
Account
Codes
Revised
Estimates
2006-07
Pak Rupees
Particulars
1. Functional Classification
016
Basic Research
046
Communications
634,536,000
1,032,971,000
1,667,507,000
363
DG Audit – Federal Government
Audit Plan 2007 - 08
2. Object Classification
A01
Employees Related Expenses
A02
Project Pre-investment Analysis
A03
Operating Expenses
A05
Grants subsidies and Write-off Loans
A06
Transfers
A09
Physical Assets
A12
Civil Works
A13
Repairs and Maintenance
90,536,000
2,245,000
64,597,000
160,075,000
77,000
304,463,000
1,043,464,000
2,050,000
1,667,507,000
The development projects selected for audit during year under review
includes;
DDO
Code
a)
Name of the Offices/ Projects
Budget appropriation
for development
expenditure in FY
2006-07
ID2125
Federal Government – Data center
52 Million
ID2560
E-services for CDA
52 Million
ID2393
E-services for Food and Agriculture
sector
ID2414
E-services for Islamabad Police
ID2032
IT/ computer lab project, machining
project with Govt. of Punjab
45.6 Million
40 Million
36.4 Million
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.
364
Chapter 20: Information Technology and Telecom Division
Budget utilization
 Compare the budget appropriation with actual utilization.
 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
 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.
VI.
ISSUES HIGHLIGHTED IN PREVIOUS YEARS








VII.
Irregular retention of Government money outside the Government
Treasury
Unnecessary retention of IT equipment
Unauthorized drawl of public funds from PLA and deposit thereof in
commercial bank account.
Irregular expenditure
Non compilation of benchmarks in violation of IT policy
Non preparation of IT Action Plan
Inordinate delay in completion of project
Heavy surrender of project funds
TIME SCHEDULE
Planning
10 days
Execution – Fieldwork
24 days
Reporting
4 days
Holding DAC Meeting
31 days
Total
69 days
365
DG Audit – Federal Government
Audit Plan 2007 - 08
Particulars
Permanent File
Planning File
Execution
Main Ministry
Identify Data
acquire Data
Upload of CAATS system
Design Test
Execute test
Report
COMSATS Institute of Information
Technology IBD
Identify Data
acquire Data
Upload of CAATS system
Design Test
Execute test
Report
IT &TD Development Projects – 129 Nos.
(All – Old &New)
Identify Data
acquire Data
Upload of CAATS system
Design Test
Execute test
Report
Monitoring of IT Projects, IT & T Division
Identify Data
acquire Data
Upload of CAATS system
Design Test
Execute test
Report
Reporting
Prepare AIR
Send AIR to PAO
DAC
Hold DAC meeting
Sign Minutes of meeting
Complete Worker Papers
Scan WP Evidence
Finalize Audit Report
Duration
69 days
5 days
5 days
24 days
6 days
1 day
1 day
1 day
1 day
1 day
1 day
6
1
1
1
1
1
1
Start Date Finish Date
27-Jul-07
15-Oct-07
27-Jul-07
1-Aug-07
2-Aug-07
7-Aug-07
8-Aug-07
4-Sep-07
8-Aug-07
14-Aug-07
8-Aug-07
8-Aug-07
9-Aug-07
9-Aug-07
10-Aug-07
10-Aug-07
11-Aug-07
11-Aug-07
13-Aug-07
13-Aug-07
14-Aug-07
14-Aug-07
days
day
day
day
day
day
day
15-Aug-07
15-Aug-07
16-Aug-07
17-Aug-07
18-Aug-07
20-Aug-07
21-Aug-07
21-Aug-07
15-Aug-07
16-Aug-07
17-Aug-07
18-Aug-07
20-Aug-07
21-Aug-07
6 days
1 day
1 day
1 day
1 day
1 day
1 day
6 days
1 day
1 day
1 day
1 day
1 day
1 day
4 days
2 days
2 days
31 days
21 days
1 day
3 days
4 days
2 days
22-Aug-07
22-Aug-07
23-Aug-07
24-Aug-07
25-Aug-07
27-Aug-07
28-Aug-07
29-Aug-07
29-Aug-07
30-Aug-07
31-Aug-07
1-Sep-07
3-Sep-07
4-Sep-07
5-Sep-07
5-Sep-07
7-Sep-07
10-Sep-07
10-Sep-07
4-Oct-07
5-Oct-07
9-Oct-07
13-Oct-07
28-Aug-07
22-Aug-07
23-Aug-07
24-Aug-07
25-Aug-07
27-Aug-07
28-Aug-07
4-Sep-07
29-Aug-07
30-Aug-07
31-Aug-07
1-Sep-07
3-Sep-07
4-Sep-07
8-Sep-07
6-Sep-07
8-Sep-07
15-Oct-07
3-Oct-07
4-Oct-07
8-Oct-07
12-Oct-07
15-Oct-07
366
Chapter 20: Information Technology and Telecom Division
Annexure A
Ministry of Information Technologies
Organization structure
367