PESHAWAR: An inquiry committee of the Khyber Pakhtunkhwa elementary and secondary education department has detected the fraudulent withdrawal of Rs106.04 million from a World Bank-funded project aimed at strengthening the education system in the province.

The money was part of a Rs26 billion World Bank loan granted to the provincial government for improving the availability, utilisation and quality of education services in Peshawar, Haripur, Nowshera and Swabi districts under the Khyber Pakhtunkhwa Human Capital Investment Project (KP-HCIP).

Following last year’s devastating monsoon floods, the project activities have also been extended to some calamity-hit districts.

The education department conducted the inquiry after the project director of the KPHCIP’s Project Management Unit (PMU) reported fraudulent withdrawal of funds.

Investigators recommend registering FIR against culprits, putting their names on ECL

The inquiry report reveals that the project director informed investigators that the fraud was committed in a “very sophisticated way” and that the involvement of the ex-accountant, who was terminated from the service, couldn’t be ruled out as he possessed all PMU knowledge and didn’t hand over most of the project’s sensitive assets, including official laptop. It declared that the accountant could be the prime suspect in the fraud.

According to the report, the cheque books, carrying cheques with serial numbers 17512276-2375 and 17511876-975, were fully exhausted in Dec 2024.

The requisition slips of those cheque books, together with cheque stubs, are missing from the records of the KPHCIP PMU and were later misused by fraudsters to illicitly obtain additional cheque books in the name of the project.

“On May 16, 2025, a person unrelated to the project, collected four sets of newly requisitioned cheque books in the name of the KPHCIP.

“This was done on the basis of an alleged fake authority letter that declared him a support staff member of the PMU. The collection occurred without the express consent of the joint signatories and despite the requisition slips specifying “self” collection by the joint signatories.”

The report said the “fraudulent transaction from the RFA (Assignment Account) of KPHCIP resulted due to contributory gross negligence and serious internal control failures at the PMU, compounded by possible collusion between PMU staff and the perpetrators and serious lack of due diligence at the part of National Bank of Pakistan.”

It added that the weak inter-agency coordination and verification lapses between the Accountant General Office and NBP, deficiencies in the FBR taxpayer register system and inadequate KYC/CCD practices at Faysal Bank further facilitated the fraudulent transaction.

Collectively, these systematic weaknesses, procedural violations and collusive practices resulted in a loss of Rs106 million to the public exchequer, according to the report.

The inquiry committee recommended the registration of an FIR under relevant sections of the Prevention of Corruption, Act 1947, and Pakistan Penal Code against already identified personnel involved in the fraud and the matter shall also be referred to the provincial anti-corruption establishment for thorough probe into the matter.

It has also recommended immediately arresting the identified fraudsters and initiating criminal prosecution and also requesting the FIA to place the names of the culprits on the Exit Control List (ECL) until investigations conclude.

Based on the conclusion of a fact-finding report submitted by the PD project management unit KPHCIP to the inquiry committee, the PD has highlighted the possible collusion of the ex-accountants of the project. The gross negligence of the FMS raises suspicions of possible collusion and shall be included in the investigation process.

The probe committee has also recommended the forensic audit to be carried out of the PMU-KPK CIP project from inception to Sept 30, 2025, by the third party through the leading chartered accountant firm having expertise in forensic audits.

According to the inquiry report, the financial management specialist in the project has failed to fulfil the responsibility as per job description including monthly bank reconciliation, expense reconciliation and ensuring internal control and advising further control to enhance overall control environments.

He failed to comply with the relevant clause of Accounting Practice and Procedure Manual.

“This gross negligence raised the suspicion of possible collusion and shall be included in the investigation carried out by relevant law-enforcement agencies,” it said.

The probe committee also accused the project’s internal audit officer of negligence and said analysing the current fraud was outcome of gross negligence causing a weak internal control environment in the PMU of KPHCIP.

It recommended to the education department that the project director be directed to improve the control environment and internal controls across all components of the project and share a clear plan for the improvement of the project along with timelines.

The committee declared that the National Bank of Pakistan had not been able to adhere to the compliance level regarding the instruction of the provincial government for fund disbursement and due customer diligence in the case.

“The bank shall be reported to the State Bank of Pakistan, regulator for banks; inquiry shall be carried out by the State Bank of Pakistan in this matter, and an action must be taken against the possible involvement of the Faysal Bank’s staff for facilitation of the perpetrators,” it noted.

Published in Dawn, December 4th, 2025