Summary

SAI Pakistan conducted a compliance audit on the operations of local governments in 36 districts of Khyber Pakhtunkhwa as well as local water & sanitation services companies. The audit touched upon three key tiers of governance: tehsil government, tehsil municipal administration, and village and neighborhood councils. The audit was initiated to ensure transparency and accountability in the utilization of public funds. Its objective was to identify potential financial irregularities, risks, and inefficiencies in management, as well as to assess compliance with the Khyber Pakhtunkhwa Local Government Act. The results were intended to assist local governments in improving the level of services provided. As a result of the audit, recovery of 10.4 billion rupees (36.6 million USD) was pointed out, whereas recovery of 368.7 million rupees (1.3 million USD) was effected till finalization of the audit report. Among the key issues noted were non-consolidation of accounts, irregular cash payments, and lack of risk identification and evaluation system. Six instances of fraud, embezzlement, or misappropriation were also identified. The audit facilitated the initiation of water & sanitation services companies’ financial statements preparation, the start of inquiries into cases involving 84.2 million rupees (296,304 USD), and the strengthening of control procedures to mitigate risks. Additionally, 23 offices converted their bank accounts to more transparent Profit & Loss Sharing mode.