LAHORE, Oct 30: The Pakistan Railways Advisory and Consultancy Services (PRACS) is a ‘parasite’ that is almost totally dependent on its holding organisation (Pakistan Railways) for its business without which it cannot survive, reveals Performance Audit Report 2013.

Focusing on the last three financial years (2009-10, 2010-11 and 2012-13), the audit report reveals that the current activities undertaken by PRACS were in fact required to be carried out by Pakistan Railways itself.

“There is nothing special with PRACS to take over the business of Pakistan Railways; reportedly most of the services were provided (by PRACS) to PR by subletting the contracts to third parties which could be directly carried out by the PR itself,” (sic) says the report submitted by the Auditor-General of Pakistan with the President’s Secretariat in mid-July this year.

The PRACS was incorporated on July 20, 1976, as a private limited company “with the prime object to earn foreign exchange by providing high quality advisory and consultancy services in the field of railways in Middle East, Africa and other developing countries. It was intended to contribute towards revenue earnings of PR.

“However, the company got itself converted into a public limited company w.e.f. Dec 23, 2002, (by revising its Memorandum of Association with the SECP) and entered into several contracts with PR regarding sale of passenger tickets, train management, catering, consultancy services etc, and started generating revenue from PR. This state of affairs proved quite harmful for PR as the company assumed a parasitic role,” says the audit conducted during April and May this year in accordance with the International Organization of Supreme Audit Institutions (INTOSAI) Auditing Standards.

The report says PRACS did not maintain the fixed assets register in accordance with the prescribed format which posed a risk to PR assets worth Rs37.977 million. Vehicles were also misused as proper log books mentioning actual purpose of the journey were not maintained.

Similarly, it said, the transport monetisation policy was adopted by the company just for the monetary benefit of BS-20 and above officers; two vehicles were permanently disposed of under this policy without approval of the Board of Directors.

According to the report, the cost-benefit analysis of the company’s operating activities revealed some alarming facts. It was found that due to operational inefficiency and improper control over expenditure, the company suffered an aggregate loss of Rs48.533 million in six activities during the three financial years.

Moreover, it said, the company was not following any rational mechanism to record direct expenses of operating activities, which eventually resulted in inflated expenses and less operating surplus. The company did not properly plan the consultancy contracts at Saudi Arabia which resulted in a net loss of Rs11.037 million by Dec 31, 2012.

The auditors found that personnel management, including recruitment and performance evaluation, had been the weakest area of PRACS’ management. The company suffered huge financial losses due to non-formulation of sanctioned strength of its regular sections, illegal appointment of a retired female government officer as director (finance & accounts), appointment of personnel without advertising jobs, selection criteria and following recommendation of the selection committee while recruiting assistant directors (information technology), deputy director (legal), marketing advisor etc., unauthorised retention of staff relating to the defunct departments of the company and irregular appointment of personnel engaged in Saudi Arabia’s contracts.

The audit report points out 'extensive financial indiscipline’ in certain areas of the company, including non-implementation of recommended management controls, non-preparation of budget and allocations, wasteful expenditure on a project meant for rehabilitation of 96 PR locomotives without proper planning, irregular or unjustified expenditure on account of medical reimbursement, traveling or daily allowances, business promotion expenses etc; non-recovery of temporary advance payments to employees and delay in the claim of Sales Tax refund etc.

The also company remained non-compliant with the Public Procurement Regulatory Authority (PPRA) rules in many cases and lost Rs6.745 million approximately due to hiring and furnishing a costly bungalow at Islamabad. Other irregularities found by the auditors included procurement of taxable goods from unregistered vendors without deduction of Sales Tax and also without annual procurement planning, besides hiring of legal services without obtaining three quotations etc.

The report mentioned the consultancy contract regarding investigation into the damage done to 10 PR bridges on Sibi-Khost Section had been unfinished since 2009. The company earned Rs28,975 only with an expenditure of Rs1283,525 during 2010-11.

The report also points out that the company inappropriately entered into a contract with PR for maintenance, overhauling and operation of 300KVA power vans for which it had no in-house facilities. The company sublet the work to a third party -- M/s Hi-tech Network (Pvt) Ltd -- though subletting was not allowed under its agreement with PR.