I I I I Project Audit Report on the Accounts of Tertiary Education Support Project IDA Credit No. 4886-PK & 4887-PK Higher Education Commission for the Financial Year 2014-15 I I I I I Auditor General of Pakistan Islamiabad I I I I U I TABLE OF CONTENTS U Abbreviations and Acronyms................................................................................................. i P R E F A C E .................................................................................................................E P A R T -1 ................................................................... ............................................................. PROJECT OVERVIEW ...................................................................................................... 2 I AUDITOR'S REPORT TO THE M ANAGEM ENT (Audit Opinion).................................. 3 FINANCIAL STATEM ENTS............................................................................................... 4 P A R T -1l................. ....,......................................... ........................................... ............ ... ...... 5 COVER LETTER TO THE M ANAGEM ENT LETTER ...................................................... 6 EXECUTIVE SUM M ARY .................................................................................................. 8 M ANAGEM ENT LETTER ................................................................................................. 9 1. INT RODUCTION ................................................................................................... I 2. AUDIT OBJECCTIIVE .............................................................................................. 3. AUDIT SCOPE AND M ETHODOLOGY ........................................................... 4. AUDIT FINDINGS AND RECOMMENDATIONSI................................................. 1 4.1. Financial Management ............................................................................................eI...........11 4 .2 . S ustainab ility....................................................................................................................... 13 4 .3 . O verall A ssessm ent ........................................................ ........................... ...................... 13 5. CONCLUSON ........................................................................................................ 4 ACKNOWLEDGEM ENT ................................................................-............................... I5 I I I I I I U I I I Abbreviations and Acronyms DLI Disbursement Linked Indicator ED Executive Director ECNEC Executive Committee of National Economic Council GFR General Financial Rules HEC Higher Education Commission HEls Higher Education Institutions IDA International Development Association INTOSAI international Organization of Supreme Audit Institutions IPFP Interim Placement of Fresh PhD ISSAI International Standards of Supreme Audit Institutions MTDF MediUm-Term Development Framework NRPU National Research Program for Universities PC-I Project Cost - I PhD Doctor of Philosophy PSDP Public Sector Development Program SDR Special Drawing Rights TESP Tertiary Education Support Project TPV Third Party Validation I I I I I I I I I I PREFACE The Auditor-General conducts audits subject to Articles 169 and 170 of the Constitution of the Islamic Republic of Pakistan. 1973 read with Sections 8 and 12 of the Auditor-General's (Functions, Powers and Terms and Conditions of Service) Ordinance. 2001. The audit of the Tertiary Education Support Project (TESP) under Higher Education Commission Credit No. 4887-PK & 4886-PK for the Financial Year 2014-15 funded by the International Development Association (IDA) was carried out accordingly. The Directorate General Audit (Federal Government), Islamabad conducted audit of the Tertiary Education Support Project during December, 20015 for the linancial vear 2014-15 with a view to reporting significant findings to stakeholders. Audit examined the ccononl. efficiency and effectiveness aspects of the Tertiary Education Support Project. In addition. audit also assessed, on test check basis, whether the management complied with applicable laws, rules and regulations in managing the Tertiary Education Support Project. The Audit Report indicates specific actions that, if taken, will help the maiagement realizc the objectives of the Tertiary Education Support Project. The Report consists of two parts. Part-I contains Auditor's Report (Atidit Opinion) and Financial Statements. Part-li contains Executive Summary. Management Letter and Audit Findings. I The report has been prepared for submission to the International Development Association (IDA) in terms of Credit Agreement No. 4887-PK and 4886-PK with the Government of the Islamic Republic of Pakistan. I I Dated: /7- .12.2015 (JUNAID MUSHTAQ QURESIHI) Place: Islamabad DIRECTOR GENERAL I I I I I I I PROJECT OVERVIEW I Name of Project: Tertiary Education Support Sponsoring Authority: World Bank (International Development Associatioi) Executing Authority: Higher Education Commission Loan No: 4887-PK & 4886-PK Loan Agreement Cost: SDR 192.200 million (Rs. 25688.79 million) Date of Commencement: 22.09.2011 Loan Closing Date: 31.12.2015 The objective of the project is to improve the conditions of teaching, learning and the research for enhanced access, quality and relevance of tertiary education. The project consists of following two parts: Part A: Higher Education Development Program Implement the program of activities corresponding to the first phase (Academic Year 2012 through 2014) as articulated in four pillars of the Second Medium Term Development Framework for Higher Education, namely: i. Improvement of fiscal sustainabi I ity and expenditure effecti veness i. Enhanced quality and relevance of teaching and research iii. Improved equitable access to Tertiary Education iv. Strengthen governance and management Part B: Capacitv Building, Policy Design and Monitoring and Evaluation Strengthening the institutional capacity of the Project Implementing Entity and the 1-Els in order to implement the MTDF-H-E II. including the coordination. financial management. 'proc-ement, reporting and monitoring and evaluation of the Project. as well as the dissemination of the development objectives and achievements thereof. Provision of technical assistance for the design and implementation of analytical work. training and policy relorms related to Part A of the Project and carrying out Third Party Validation studies regarding the Project's key interventions reflected in the Disbursement-Linked Indicators. I During the financial year 2014-15. 1-ligher Education Commission (HEC), Islamabad received following tranches through budgetary support: I S. No. Letter No. Credit No. Date U S5 Pak itt es i. 1FD5216/GAFU-167-2015 I DA-48860i M-EC-VIl) 18.062015 22.967.086.13 2.334.953.-105 2. FD/4367/GAFU-167-2015 1DA-48860- (IEC-VI 22.05.2015 15.311.227.80 1.558.7-14.992 Total 38.278,313.93 3,893.700h397j I I I I I AUDITOR'S REPORT TO THE MANAGEMENT (Audit Opinion) Auditor's Report on the Tertiary Education Support Project Financial Statements We have audited the accompanying Financial Statements of Tertiary Education Support Project. Higher Education Commission of Pakistan Credit No. 4887-PK and 4886-PK that comprise Statement of Receipts and Payments together with the Notes forming part thereof for the year ended 30h June. 20 1. Management Responsibility It is the responsibility of the project management to establish and maintain a system 0f internal controls, and prepare and present the Statement of Receipts and Payments in conformity with the requirements of Cash Basis [IPSAS. Financial Reporting under the Cush Basis of Accounting Standard. Auditor's Responsibility The responsibility of the auditor is to express an opinion on the financial statements based on the audit conducted. We conducted our audit in accordance with the International Standards of Supreme Audit Institutions. These standards requ ire that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free of material misstatements. The audit process includes examining, on a test basis, evidence supporting the anounts and disclosures in the financial statements. It also includes assessinu the accounlint principles used and significant estimates made by the management, as well as evaluating the overall statement presentation. We believe that our audit provides a reasonable basis tOr our opinion. Qualified Opinion In our opinion, except flor the possible elfcts of the matter described in the Basis or Qualfied Opinion: a) The financial statements present tairly, in all material respects, the cash receipts and payments by the project for the year ended 3 0" June. 2015 in accordance with Cash Basis IPSAS, Financial Reporting under the Cash Basis of Accountiig Standard. b) The expenditure has been incurred in accordance wvith the requirements of legal agreements. I (JUNAl USHTA ESHI) DIRECTOR GENERAL Directorate General Audit (Federal Government). Benevolent Fund Building, Zero Point. Islamabad. Dated: (7t 12.2015 I I U I I I I I I 3 FINANCIAL STATEMENTS I I I I I I I I I I I4 I I U HIGHER EDUCATION COMMISSION OF PAKISTAN IDA Credit No. 4887-PK and 4886-PK TERTIARY EDUCATION SUPPORT PROJECT (TESP) Annual Financial Statement for the FY 2014-15 I Description Note No Amount Rs Revenues I Share of World bank/ as budgetary support to the Government of Pakistan for Component I- Eligible Expenditures Program (EEP) 1 3,893,700,397 Share of the Government for Component I- Eligible Expenditures Program (EEP) 2 37,336,752,673 Government Grants for 3 160,000,000 Total Funds 41,390,453,070 EKpenditures/Releases E Scholarships 4 1,898,324,831 Tenure Track Salary 5 2,198,544,000 Pakistan Education Research Network (PERN) 6 180,623,026 National Research Program for Universities 7 746,695,176 I nternational Research Support Initiatives Program 8 396,629,998 Recurrent Grant to Universities and other Institutions 9 35,809,654,000 Sub Total Elegible Expenditure 41,230,471,031 I Expenditure on Component II - Technical Assistance 10 159,982,039 Total Uses of Funds/Expenditures/Releases 41,390,453,070 Balance I D CTOR A DIRECTOR± (FINANCE) HIGHER EDUCATION COMMISSION HIGHER EDU N COMMISSION SECTOR H-9, ISLAMABAD SECTOR H-9, I LAMABAD I0 I I I I HIGHER EDUCATION COMMISSION OF PAKISTAN IDA Credit No. 4887-PK and 4886-PK Annual Financial Statement for the FY 2014-15 Notes to the Financial Statements _No. C it Description Amount in RS Receipts Share of World bank for Component I- Eligible Expenditures Program (EEP)and II, as budgetary 1 support to the Government of Pakistan IDA credited Fedral Government 5BP Account with US $ 15,311,224.80 on May,22 2015 1,558,746,992 IDA credited Fedral Government SBP Account with US$ 22,967,086.13 on June, 18 2015 2,334,953,405 Total Funds from IDA/Worldbank to the Government as Budgetary support 3,893,700,397 Share of the Government of Pakistan for Component I- Eligible Expenditures Program (EEP) as 2 Recurring & Development Grants to HEC Recurring Grant for Component I- Eligible Expenditures Program EEP) 35,438,445,804 Development Grant for Component I- Eligible Expenditures Program EEP) Scholarships under EEP DF-1015-0004 (Post Doc Phase 2) 24,099,628 DF-1015-0017 (Overseas scholarship - Phase 2) 797,292,636 DF-1015-0029 (MS Program Korea) 1,910,863 DF-1015-0041 (Overseas Sch(rship Phase 1) 78,844,330 DF-1015-0052 (PhD Indigenous 5,000 Scholarships) 192,997,082 DF-1015-0O84 (HRDI UESTP Scholarships Phaase 1) 803,180,292 Sub Total Dev. Grant for Component 1 Scholarships 1,898,324,831 Total Funds from Government as Budgetary Releases for Component 1 EEP 37,336,770,634 3 Funds from Government for Component II - Technical Assistance 160,000,000 Total Government share as Grants 37,496,770,634 I I I I I Expenditures/Releases Component I- Eligible Expenditures Program EEP) The World Bank/IDA provides budgetary support to the Government of Pakistan (EAD) for following expenditures I which are a part of HEC's budget of eligible activiuies.These expenditures are clearly identifiable in the Financial Management Information Statements and are referred to as EEPs.The expenditure mechanism was found satisfactory by the World Bank policy and in particular the three pillars namely: (a) the fiscally expenditures are productive, (b) they contribute to solutions within asustainable framework, and (c) acceptable oversight arrangements are in place. The details of Eligible Eexpenditure follows: 4 Scholarships Type: Development Budget Description: Costs associated with 6 post-graduate scholarship projects managed by HEC. Each project is clearly defined and has a separate approved PC-1 in place Nature of expenditures includes: (a) training related expenses such as tuition fees, language course fees, stipends, travel expenses and so forth b) pmject management related expenses such as staff salaries, operational expenses, etc. Oversight: The projects are managed by HEC and its internal controls apply which have been reviewed and found adequate by WB Amount in RS OF-1015-DG04 (Post Doc Phase 2) 24,099,628 DF-1015-0017 (Overseas scholarship - Phase 2) 797,292,636 DF-1015-0029 (MS Program Korea) 1,910,863 DF-1015-0041 (Overseas Schirship Phase 1) 78,844,330 DF-1015-0052 (PhD Indigenous 5,000 Scholarships) 192,997,082 DF-1015-0084 (HRDI UESTP Scholarships Phaase 1) 803,180,292 Total Scholarships 1,898,324,831 I I I I I 1 ' 5 Tenure Track Scheme (TS) Salary Type: Recurrent Budget. It is a separate funding stream to provide additional funds to universities for financial impact of faculty appointed under TTS. Faculty on the tenure track system are appointed by universities on the basis of criteria/qualifications prescribed in the Tenure Track Statutes, which have already been adopted by universities through their governing bodies. The amount paid comprises two components: Salary and One Month' Gratuity paid for every completed year of service, as per salary package approved by the Finance Division, GOP and notified by HEC. Additionally, the requirement of funds for the Interim Faculty Placement Program is also met from the funds under the Tenure Track Fund. In this program, the fresh returning PhD graduates (indigenous and overseas) are placed in universities for one year and their salary amount equivalent to the salary of Assistant Professor under TTS are provided to universities where they are placed. Oversight : Appointment of faculty under tenure track is subject to clearance under the university's own procedures and endorsement from the Quality Assurance Division of HEC. 1 Amount in RS Tenure Track Pay 1,375,982,234 Tenure Track Gratuity 277,017,766 Interim Placement of fresh PhDs Pay 545,544,000 Total Tenure track Salary 2,198,544,000 I I I I I I I I I A 1 I 6 Pakistan Education Research Network (PERN) Type Recurrent Budget - Description: The network provides services such ultra-high speed internet, audiolvideo conferencing, access to digital library resources such as journals, electronic books and research thesis access facilities to stake holders of the academic and research sector of the country. Expenditures under this program include costs associated with the operation and maintenance of this network such as bandwidth charges. fiber leasing, etc. Oversight This network is operated and maintained by HEC and its internal controls apply which have been reviewed and found adequate by the WB. I o. DDescription Amount in RS Pakistan Education Reseach Network(PERN) Basic Pay Officer - PERN 5,534,488 Basic Pay Staff - PERN 3,914,593 Regular Allowances - PERN 4,063,550 Training Domestic/International -PERN 1,106,327 Travelling Allowance -PERN 1,383,606 Printing & Publication - PERN 45,029 Advertising & Publicity - PERN 304,464 Contigencies & Unforseen Expenditure- PERN 2,715,019 Electricity Charges- PERN 3,202,604 Fuelling Charges for Generators- PERN 10,402,310 Fuelling for Vehicals- PERN 300,000 repair & Maintenance Transports- PERN 86,176 Point of Presence Sites- PERN 1,995,662 Warranty of Routers- PERN 8,203,886 Warranty of Power Equipments- PERN 9,191,593 Warranty of Cooling System Equipments- PERN 915,000 Managed Services for Active Equipments- PERN 44,339,300 Premium Internet Bandwidth- PERN 209,174,680 International Private Lease Circuit (IPLC)- PERN 16,093,509 Metro Fibre( Lease Cost)- PERN 69,603,295 National Fibre( Lease Cost)- PERN 143,231,120 Membership Renewal Fee[Dante,APAN,APNIC etc]- PERN 435,017 Anti Plagirisim Software License Fee- PERN 53,516,757 Application / Licenses for PERN Users 93,578,641 Purchase of Hardware [Firewalls,IPS]- PERN Purchase of LT Equipment [Server] -PERN 941,625 Hardware {Routers for Aggregation PoP Sites]-PERN 17,006,105 701,284,356 PERN Revenues as Refunds from Universities 520,661,330 Total Expenditure PERN 180,523,026 1 I I 7 National Research Program for Universities Type: Recurrent Budget Description. The research grant program awards research grants to creative researchers in a I Amount in RS National Research Program for Universities 746,695,176 IEB International Research Support initiatives Program Recurrent Budget Description. A 6 month research fellowship abroad scheme is available to full time PhD students Amount in RS international Research Support Initiatives Program 396,629,998 I I I I 1 I U I I 3 I I R I 9 Recurring Grant to Universities and Institutions Recurrent Budget- Description: This constitutes more than 50 percent of the expenditures under EEPs. The Government of Pakistan provides annual recurrent grants to public universities to subsidize their cost of operation, Public universities are autonomous organizations established through Provincial/Federal Acts, and are governed by respective Syndicate/Board of Governors. They have administrative and financial autonomy and prepare their own annual operational budgets, which are approved by their governing bodies on the recommendations of the Finance Planning Committee. Grants are provided to public universities, degree awarding institutions and other HEls. Annually, the detailed requirement of funds from each university is invited and examined in detail. The amount of funding allocated to each institution is based on a comprehensive funding formula that is subject to further refinment. Proposals are formulated and submitted to the Budget and Finance Committee of the Commission, and on its recommendations, the Commission approves allocation of the recurring grant. The finalized allocation is submitted to the Govt. for incorporation in the Annual Budget Book of the Federal Government. The annual recurring grant partially covers annual operational expenditures under salaries, non- salary, and research expenditures. I Oversight: HEC exercises extensive oversight of the proper utilization of these funds. HEC is represented on the governing bodies of universities and is often (but not always) represented on the Finance and Planning Committees where all matters pertaining to the financial management of universities are discussed in detail. The allocated grant is released by HEC on a periodic basis after receiving funds from the Govt. Subsequent release of installments of the allocated recurring grant is only made once the detailed Utilization Report (object head-wise) is submitted to HEC duty countersigned by the respective head internal audit/resident auditor of the recipient institution. Universities are also required to provide a declaration that 'all codal formalities for incurring expenditures were exercised'. University Releases (Rs) Applied Economics Research Centre Univer 93,331,000 HEJ Research Institute of Chemistry Univ 355,965,000 Third World Centre for Science &Tech. Un 196,755,000 Dr. Panjwani Centre for Molecular Medici 67,372,000 Dr. A. Q. Khan Institute of Blo-Technolo 64,218,000 Institute of Biochemistry & Biotechnolog 8,218,000 Institute of Clincial Psychology Univers 34,551,000 Centre for Clincial Psychology Universit 30,790,000 Z.A. Bhutto Agriculture College Dokri (5 80,312,000 University College of Agriculture B.Z. U 54,291,000 University College of Engg. & Tech. B.Z. 69,017,000 School of Biological Sciences University 100,321,000 Water Management Research Centre Univers 21,746,000 Scientific Instrumentation Centre UET Pe 12,427,000 Shaikh Zayed Islamic Centre University a 27,457,000 Shaikh Zayed Islamic Centre University a 29,021,000 Shaikh Zayed Islamic Centre University a 27,954,000 Quaid-i-Azam Chair Quaid-i-Azam Universi 1,840,000 Shah Abdul Latif Bhitai Chair University 7,690,000 Seerat Chair University of Karachi Karac 2,611,000 Seerat Chair Islamia University Bahawalp 2,539,000 Salam Chair in Physics Govt. College Uni 8,009,000 Dawah Academy International Islamic Univ 117,835,000 School of Mathematical Sciences Govt. Co 55,929,000 Al-Khawarzmi institute of Computer Scien 53,671,000 Geology University of Peshawar Peshawar 75,292,000 I A I Physical Chemistry University of Peshawa 64,845,000 Solid State Physics University of Punjab 63,868,000 Water Resources Engg. UET Lahore 45,687,000 Molecular Biology University of Punjab L 188,448,000 Marine Biology University of Karachi Kar 48,193,000 Analytical Chemistry University of Sindh 67,854,000 Mineralogy University of Balochistan Que 30,813,000 Psychology Quaid-i-Azam University Islam 38,938,000 History & Cultural Research Quaid-i-Azam 46,462,000 Arts & Design Mehran University of Engg. 42,871,000 Gender Studies Quaid-i-Azam University I 20,247,000 South Asian Studies University of Punjab 22,846,000 Europe University of Karachi Karachi 22,619,000 Far East & South East Asia University of 25,387,000 Russia China & Central Asia University o 29,234,000 Middle East & Arab Countries University 13,837,000 Africa North & South America Quaid-i-Aza 20,406,000 Pakistan Study Centre, Uni Punjab Lahore 15,164,000 Pak Study Centre University of Karachi, 16,499,000 Pak Study Cntre Uni of Sindh, Jamshoro 17,450,000 Pakistan Study Centre Uni of Peshawar 23,363,000 Pakistan Study Centre, Uni Baloch,Quetta 18,678,000 National Institute of Pakistan Studies Q 36,654,000 Iqbal Inst of Rech & Dialogue, IIU ISD 32,025,000 University of Karachi, Karachi 1,459,238,000 University of Sindh Jamshoro 1,504,773,000 Shah Abdul Latif University Khairpur 420,357,000 Federal Urdu University of Arts Science 728,639,000 University of the Punjab Lahore 2,044,347,000 Bahauddin Zakariya University Multan 957,891,000 Islamia University Bahawalpur 1,016,079,000 Fatima Jinnah Women University Rawalpind 231,347,000 Government College University Lahore 445,149,000 Lahore College for Women University Laho 404,981,000 Government College University Faisalabad 589,798,000 University of Sargodha Sargodha 692,069,000 University of Education Lahore 414,663,000 Unfversity of Peshawar Peshawar 1,082,408,000 Gomal University D.I. Khan 647,481,000 Kohat Univ. of Science & Tech, Kohat 278,651,000 University of Malakand Chakdara 289,328,000 Hazara University Mansehra 392,828,000 University of Balochistan Quetta 600,640,000 Balochistan University of I.T. & Managem 427,939,000 Quaid-i-Azam University Islamabad 763,310,000 International Islamic University Islamab 1,237,343,000 National University of Modern Languages 620,954,000 AJK University Muzaffarabad 350,311,000 Karakurum International University Gilgi 243,900,000 Sardar Bahadur Khan Women University Que 159,951,000 University of Science & Tech. Bannu 176,997,000 Frontier Women University Peshawar 158,878,000 Air University Islamabad 202,595,000 Virtual University of Pakistan Lahore 100,000,000 Altama Iqbal Open University Islamabad 275,000,000 I 1 Institute of Business Administration Kar 112,496,000 COMSATS Institute of IT Islamabad 1,104,453,000 Institute of Management Sciences Peshawa 161,812,000 Institute of Space Technology Islamabad 97,802,000 Sukkur Institute of Business Administrat 202,599,000 Pakistan institute of Development Econom 75,219,000 Kinniard College for Women Lahore 125,823,000 Sindh Agriculture University Tandojarn 786,263,000 University of Agriculture Faisalabad 1,242,657,000 University of Arid Agriculture Rawalpind 477,764,000 NWFP University of Agriculture Peshawar 648,838,000 University of Veterinary & Animal Scienc 432,571,000 Lasbela University of Agriculture Water 176,983,000 NED University of Engg & Tech. Karachi 904,124,000 Mehran University of Engg. & Tech. Jamsh 854,076,000 Quaid-i-Awam University of Engg. Science 339,510,000 University of Engg. & Tech. Lahore 1,254,489,000 University of Engg. & Tech. Taxila 558,781,000 NWFP University of Engg. & Tech. Peshawa 643,304,000 Balochistan University of Engg. & Tech, 172,444,000 Liaquat University of Medical & Health 5 637,171,000 Dow University of Health Sciences Karach 442,928,000 University of Health Sciences La hare 79,950,000 Khyber Medical University Peshawar 119,866,000 King Edward Medical University Lahore 202,595,000 University of Gujrat 264,254,000 National Defence University, Islamabad 66,862,000 Islamia College University, Peshawar 286,458,000 National Textile University Faisalabad 169,338,000 Mirpur University Science & Technology 281,872,000 Abdul Wali Khan University, Mardan 232,161,000 Shaheed Benazir Bhutto University, Sheri 116,960,000 University of Swat, Swat 86,411,000 PeopleKhyber Medical University Peshawar 43,204,000 ShaheeKhyber Medical University Peshawar 43,204,000 University of Poonch, Rawalakot 205,000,000 University of Haripur, Haripur 105,000,000 Sindh Madressatui Islam University, Kara 70,000,000 Shaheed Benazir Bhutto Uni,Benazirabad 60,000,000 FATA University, Akhurwal, Dera Adam Khel 17,000 The Women University of Azad Jiammu & Kas 25,000,000 Benazir Bhutto Shaheed University Lyari, 50,000,000 Bahria University, Islamabad 70,000,000 The Women University, Multan 60,000,000 Bacha Khan University, Charsada 60,000,000 University of Swabi, Swabi 50,000,000 University of Turbat, Loralai 40,000,000 GC Women University, Faisalabad 25,000,000 Shaheed Zulfiqar Bhutto Medical Uni Isb 25,000,000 Pakistan Institute of Fashion & Desigen 50,000,000 35,809,654,000 I I 'I I 10 Component II -Technical Assistance Goods 20,324,079 Training 89,813,387 Consultant's Services 44,631,973 Incremental Operating Costs 5,212,600 159,982,039 I I I I I I I I I N I I I 1 I