Rs70bn discrepancies in foreign debt, grants accounting noted in KP

PESHAWAR: Significant financial discrepancies have surfaced in the government of Khyber Pakhtunkhwa (KP) financial records for the fiscal year 2022-23 audit report.

The findings, stemming from the certification audit of the province’s financial statements, reveal issues in reconciling foreign debt, understated receipts and outdated records, raising questions about transparency and compliance with financial regulations.

The audit highlighted a staggering Rs48.708 billion in unverified foreign debt and an understatement of receipts from foreign-aided projects by Rs21.715 billion. It was noticed that an amount of Rs48,708 million was shown as foreign debt. On detail scrutiny, it was observed that no further details of receipts and payment of individual loans were available. The total amount received during the year was written as a lumpsum in the “statement of detail of foreign loan”.

These discrepancies occurred due to non-compliance with the Accounting Policies and Procedures Manual (APPM). Specifically, the APPM mandates that all loan receipts be recorded in the Federal or Provincial Consolidated Fund and reconciled with the Economic Affairs Division (EAD) and the Ministry of Finance.

The key observations from the audit show that the statement of domestic debt has not been updated since 2017-18. Records of federal loans have remained static since 2013-14. The report said that Rs26,909 million, listed as debt from the Bank of Khyber, was untraceable in financial accounts. A lumpsum figure of Rs70,423 million for foreign loans lacked detailed records of individual receipts and payments. The audit further revealed that Rs21,715 million in foreign debt raised during the fiscal year was not accounted for in the financial statements. Additionally, grants and loans from overseas donors were not distinguished, contrary to guidelines that stipulate grants, unlike loans, are not liabilities.

The failure to adhere to APPM regulations has resulted in unauthenticated figures in the province’s financial accounts, potentially undermining fiscal credibility.

The audit recommends an immediate reconciliation of debt records to ensure a transparent and accurate financial picture. The findings highlight the urgent need for the government of Khyber Pakhtunkhwa to strengthen its financial management practices and accountability mechanisms to prevent such lapses in the future. An official told this correspondent that audit objections are normal routine matter and are adjusted during PAC and DAC. However, officials are responsible to follow the procedures and regulations.