Operational Audit Report on Islamabad Electric Supply Company (ISCO), 2011
This project was component 1 of the Power Distribution Improvement Programme financed by the USAID to bring improvements in the power distribution facilities in Pakistan. The component was designed to conduct operational audits to measure improvements in performance over time. “The audits covered governance, operational, financial, human resources, communications, and customer service areas; and surfaced opportunities for fundamental improvement in all these.” (PDIP April 2011) The purpose of this exercise was to boost performance and also help increase public service delivery and enhance customer satisfaction. The main findings of the audit report in various sectors include governance is plagued by political interference. In the organization when IESCO is now applying commercial practices for cash flows are reporting to Superintendent Engineers who are responsible for the system stability and reliability, this arrangement creates a conflict of interest. (PDIP April 2011) IESCO claimed that electricity losses were 9.8% but the audit found that it was over 13.7%. The flip side of financial management can be seen in the example of AJ&K government is buying electricity at much lower tariff and also its non-paid bills have accumulated to huge amounts but all these losses are being paid by the remaining consumers. The old bureaucratic system in the financial sector is hampering new investments and performance due to poor cash flows. “A new, rationalized financial framework, covering both internal and external relationships and transactions, is needed to assure better bottom-line performance.” (PDIP April 2011) HR sector is also facing difficulties due to unskilled overstaffing and non-interest of skilled workers due to low level of salaries.
Performance Audit in International Arena
A number of countries including Korea, Malaysia, the Philippines, Sri Lanka had amended laws to include value for money under its purview. Pakistan and India have also started but without a formal change in laws. By the close of last centuries, almost all the western developed nations have enacted their legislation on Performance auditing. Although most of the central and state governments are using performance auditing extensively and a lot of research is also being done but local governments are not under research. (Åge Johnsen Volume 10, Issue 3, 2001) The scope of performance audits in the international arena has increased very much and there is hardly any field that is covered by it. (Buhr Vol. 11 Iss: 2, 1988)
Performance Audit: Hurdles and Hindrances
Performance Audit is facing many hurdles because it is a new concept in the world of management. It has very few supporters because we have been accustomed to financial and regularity audit that is mainly concerned with rules and regulations. Another hurdle is the non-availability of the required number of auditors in the Pakistan Audit department that is even not able to fully implement its regular audit plan due to deficiency of the staff and resources. Due to frequent interruptions in the political system of Pakistan and the absence of the Public Accounts Committee for many years, the system of Performance Audit has not been established. Pakistan has no proper system of accountability that can rely upon the reports of the Performance Audit and the few organizations like the Federal Investigation Agency (FIA) and National Accountability Bureau (NAB) have not been able to win the confidence of the people of Pakistan and they scarcely use the reports of the Performance Audit. No special laws for Performance Audits have been promulgated to give it legal cover like in many western countries. The existing Performance Audit Wing (PAW) is not considered one of the major offices of the Audit Department and its share in budget and human resources of the audit department is less than 5%.