LAHORE, Aug 1: The Auditor-General of Pakistan office has pointed out in its report for the year 2001-02 that Wapda (Water and Power Development Authority) failed to produce even a single internal-audit report despite having an elaborate set-up for the purpose.

The report, a copy of which has been presented to the president, notes that Wapda and its distribution companies have their own setup for an internal audit, which consists of a chief auditor assisted by five deputy chief auditors at the headquarters besides some eight regional deputy chief auditors and 176 audit parties.

The objective of internal controls is to obviate chances of financial irregularities, the report says: "Despite the presence of a large qualified setup of accounts and internal audit in Wapda, numerous irregularities of common occurrence were reported by statutory audit."

For instance, the report notes: "The project authorities did not manage external cash flows (foreign loans) efficiently and continued to pay commitment charges. The Asian Development Bank deducted commitment charges of Rs1.7 million on the amount less drawn during the period under report.

It shows that the process of acquiring foreign loans for a project is not based on proper planning for timely utilisation of external cash flow." The report further says that a system for custody, supervision, maintenance and security exists in Wapda.

In spite of that, cases of theft, misappropriation and mismanagement of assets have been reported. It shows that either there is some flaw in the existing internal control system or the system is not implemented in an efficient manner.

Contract management is yet another area which needs attention of the authority, the report says. Lack of proper implementation of financial controls leads to important clauses of agreements not being enforced in some cases, which causes financial loss to the organization.

The report also points out unsatisfactory financial performance of companies, non-recovery of huge amounts from government departments and private consumers and violation of financial rules - results of weak internal controls and inefficient financial management.

An integrated internal control system of a department helps safeguard its assets, detect and prevent frauds and misappropriation, promote economically effective and efficient operations and accuracy of transaction.

It also provides monitoring and control for action against irregular, un-economical, inefficient and ineffective operations. In this sense, an internal audit is a management tool that is built as a part of the infrastructure to help managers run the entity for achievement of objectives on a sustained basis.

The report further states that Wapda is responsible for a unified and coordinated development of water and power resources of Pakistan and is one of the largest users of public funds. Its operations call for a high degree of financial discipline to ensure regularity of its transactions.

In spite of all these factors, the report observes, not a single internal audit report has been generated, which would have highlighted various financial irregularities to be considered at authority's level.

Local audit inspection reports have been generated and discussed only at the level of company's chief executive. This speaks of non-implementation of proper internal controls, which results in occurrence and repetition of irregularities that are pointed out in various audit reports.

Such irregularities can only be stopped if the internal control mechanism existing in Wapda is strengthened and made more effective, it says.