Loss making SOEs

1. 1

2. DG Audit Railways

3.  Number and Size of the SOEs
 Nature of business of SOEs
 Qualified Audit opinion issued by the chartered
accountants on the Accounts of SOEs
 Significant and issue based Pares
3

4. Criteria
Names of SOEs
Pakistan
Railways
PRACS RAILCOP PRFTC
No. of
employees 67,627 350 739 250
Sales
(Rs in Million) 47,584 219 1,242 153
Total assets
(Rs in Million) 385,304 940 3,049 942
4

5. 5
Name of SOE Nature of business
Pakistan
Railways
A public utility service providing transportation services of
passengers and goods to the public
PRACS
providing Advisory and consultancy services besides
operating Railway reservation offices + outsourced
trains/dining cars
RAILCOP
Providing construction and manufacturing services for Pak
Railway and in other public private sectors.
PRFTC
Planning, designing, operating and managing the operation
of freight transportation.

6. 6
Name of
SOEs
Name of CA
Firm
Financial
Year
Qualified opinion
PRACS
Fazal Mehmood &
Company
chartered
Accountants
2018-19
1. Actuarial valuation of
employees retirement benefit plan
as per IAS-19 was not conducted
by the management of the
company
2. Deferred Tax Asset/Liability
has not been accounted for
appropriate to annexed financial
statements by the managements
as per IAS-12.

7. 7
Name of
SOEs
Name of CA
Firm
Financial
Year
Qualified opinion
RAILCOP
Riaz Ahmad &
Company
Chartered
Accountants
2018-19
Detail of quantities of inventory
items provided at the time of
stock take on 30-06-2019 was
different from inventory valuation
sheets.

8. 8
Name of
SOEs
Name of CA
Firm
Financial
Year
Emphasis of matter paragraph
PRFTC
Fazal Mehmood
& Company
chartered
Accountants
2018-19,
2019-20
1. Capital work in progress up to
30 June 2019 & 2020 was
transferred to Pakistan Railways
and the Finance facility relating to
the construction was transferred
to Huaneng Shandong Ruyi
(Pakistan) Energy Private Limited
as well.
2. Note 7.1 of the financial
statements states that the amount
receivable from Pakistan
Railways has not been received.

9. Nature Qualifications of Appropriation Account
Non-
Implementation of
NAM
Pakistan Railways has not adopted New Accounting Model
(NAM) which was required to be implemented w.e.f. 1st
July, 2005.
Non- segregation
of PSDP Budget
Non-segregation of PSDP budget under detailed heads of
account - Rs 8,787.24 million.
Excess
Expenditure over
budget allotment
and without
budget
Excess expenditure against allocated budget at accounting
unit level Rs 6,023.37 million and savings of Rs 3,547.07
million.
 Excess expenditure over and above budget allotment
under Revenue Grant -Rs 3,102.18 million.
Unauthorized expenditure without budget allotment - Rs
352.77 million.
9

10. Nature Qualifications of Appropriation Account
Incorrect
budgeting /
booking of
earnings
Incorrect budgeting of expenditure and earnings resulted in
cash shortfall of Rs 5,518.49 million.
Overstatement due to incorrect booking of withholding tax in
Gross Earnings and Deposit Miscellaneous - Rs 108.36
million.
Overstatement of earnings due to incorrect treatment of
amount received for Deposit work - Rs 660.00 million.
Overstatement/ understatement of earnings due to incorrect
booking Rs 80.44 million and Rs 23.01 million.
Booking of
Prior Year
Expenditure
Wrong booking of expenditure resulting in overstatement and
understatement by Rs 3,106.72 million and Rs 306.85 million
respectively.
Deliberate booking of expenses pertaining to previous
financial year resulting in overstatement of expenditure for the
FY 2019-20 - Rs 1,714.34 million.
10

11. Nature Qualifications of Appropriation Account
Non- clearance of
Suspense balances
 Non-adjustment of expenditure held under various
suspense heads Rs 10.81 million and Rs 1,775.07 million
respectively.
Misclassifications
of expenditure
among Grants and
within the grant
Unauthorized booking of expenditure from Revenue to
Capital and vice versa - Rs 128.07 million and 3.464
million.
Misclassification of expenditure under different heads of
accounts - Rs 111.16 million.
Deferment of
Expenses
Deliberate deferment of expenses to next financial year
resulting in understatement of expenditure for the FY 2018-
19 - Rs 1,714.34 million
Understatement of expenditure of Rs. 3,115.08 million
due to non booking of payment of Pay & Pension relating
to FY 2015-16 (Also highlighted for PAC vide para 2.4.7).
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12. Nature Qualifications of Financial Statements
Cash vs Accrual
basis of
Accounting
Incorrect accounting policy for recording revenue receipts
on accrual basis and expenditure on cash basis resulting in
overstatement of receipts and understatement of
expenditure.
Accrued liabilities
Non-disclosure of accrued liability on account of interest
and exchange risk premium and retirement of foreign loans.
 Non-recording of pension / gratuity / commutation
/arrears liability in Financial Statements of Pakistan
Railways - Rs 4,706.67 million.
Non-recording of liability on account of amount payable
to Railcop and NLC for services rendered - Rs 1,381.23
million.
Unpaid cheques not recorded in the books of accounts as
liability - Rs 206.68 million.
12

13. Nature Qualifications of Financial Statements
Incorrect valuation
of Fixed assets
Incorrect valuation of fixed assets due to non-recognition
of depreciation, losses, additions and deletions.
Non-recording of assets transferred by PRFTC in the
Financial Statements of Pakistan Railways - Rs 3,395.13
million.
Incorrect
Accounting policies
i.e
- GPF Interest
- Double booking
of Federal Govt.
Investment
Incorrect accounting policy for recording of interest of
GPF balances as receivable from Federal Government
resulting in overstatement of current assets valuing
Rs 15,108.87 million.
 Incorrect accounting policy for recording Federal
Government investment on replacement account resulting
in overstatement of Assets and Liabilities due to double
accounting - Rs 2,657.87 million.
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14. Name of
SOE
Nature Important observations
RAILCOP
Doubtful adjustment
of inventory without
supporting record –
Rs 301.49 million
RAILCOP management made an adjustment in
inventory for Rs 301.49 million in financial year
2018-19. The adjustment was made without any
supporting record which could not validate the
authenticity of adjustment. The detail of inventory
items provided at the time of physical count as on
30.06.2019 did not match with inventory valuation
sheets and consumption of inventory was charged to
the previous financial years.
RAILCOP
Issues in track
manufacturing –
Rs 561.75 million
TWS management manufactured 3,319,250 units of
different P. Way items in excess over the Depot
Work Requisition (DWR). These P. Way items were
manufactured without demand and are lying idle in
TWS Raiwind. This resulted in unnecessary
production of different items amounting to
Rs 561.75 million.
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15. Name
of SOE
Nature Important observations
PRACS
Loss to Railway due
to deviation of
PRACS from core
objectives – Rs 32.08
million
The PRACS remained dependent upon PR to run its operations
instead of exploring the business from open market. PRACS was
neither supplier of goods nor had any expertise in the field of
consultancy but the company used to participate in the tenders
called by PR for procurement of goods & services. PR awarded
contracts for works & supply of goods, which were further sub-
contracted by PRACS at low rates and earned profit of Rs 22.303
million.
Pakistan
Railways
Non-recovery from
private parties –
Rs 1,039.42 million
An amount of Rs 1,039.42 million was recoverable from various
private parties on account of demurrage charges, penalty and
rental charges etc. Railway management failed to realize the same
and resultantly faced acute shortage of cash flow in managing
financial transactions.
Pakistan
Railways
Loss due to non-
recovery of Railway
dues from
Government
Departments –
Rs 862.58 million
An amount of Rs 862.58 million was recoverable from various
Government Departments and Authorities such as Port Qasim
Authority, Postal Department, Foods Department, Education
Department, PSO, Military Department, Islamabad Dry Port etc.
Railway management failed to realize the same resultantly faced
acute shortage of cash flow in managing financial transactions. 15

16.  Loss sustained by PR due to non-recovery of dues from contractors of
outsourced trains Rs 1,430 million
 Encroachment of Railway land and illegal conversion of residential land
into commercial by occupants Rs 97,748 million
 Financial irregularities in execution of signaling projects Rs 2,623 million
 Extra consumption of fuel Rs. 1,359 million
 Non-recovery of maintenance charges of sidings and level crossings Rs.
2,638 million
 Procurement of defective material Rs. 1,573 million
 Irregular award of contract in violation of public procurement rules Rs.
3,288 million
 Un-authorized execution of scheme without approval Rs. 5,124 million
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