Rs40bn financial scandal: KP audit reveals Rs21bn in suspicious transactions

PESHAWAR: The Rs40 billion financial scandal in Khyber Pakhtunkhwa has taken a serious turn, with the DG Audit uncovering over Rs21 billion in irregular and suspicious payments during scrutiny of the 2023-24 fiscal year.

It was revealed that the payments were not only absent from the official ledgers but were also missing from the list of regular cheques issued by the concerned division. These findings were formally conveyed to the Communications and Works Department, but no action has been taken to date. The only response from the department was, “A reply will be provided later,” casting serious doubt over the department’s commitment to transparency and accountability.

According to official documents, the head in question was designated to hold two percent earnest money and retention money submitted by contractors. The method for using this account had already been prescribed. As per CM Secretariat letter No. SOVI/CMS/KPK/1-13/2016 dated April 8, 2016, the 2 percent earnest money deposited by contractors was not to be refunded until expiry of their financial or technical liability period. Likewise, retention money was to be returned in two phases: 50 percent upon substantial completion of the project, and the remaining 50 percent after completion of the defect liability period. Furthermore, paragraph 395 of the CPWA Code states that no security deposit can be returned or released without special authorisation from the competent authority, and only under the terms of the contract or bond.

The audit of records of the C&W Division, Upper Kohistan, by the SAP system (a government financial management software), indicates payments amounting to Rs21,376,945,702 made under Object Head G10113 for the fiscal year 2023-24. However, they were not reflected in the official accounts. Further investigations revealed these payments were not only missing from the official accounts but were also absent from the list of ordinary cheques issued. Source disclosed that in fact, the original ledgers and official cheque books were not used at all — instead, fake cheque books were allegedly procured. As a result, the payments have been declared doubtful and unverified.

The audit report explicitly states that this serious financial mismanagement occurred due to the negligence and carelessness of the relevant staff. When the issue was pointed out in February 2025, the authorities responded only by saying that a written reply would be provided later. Sources in the Communication and Works Department told this correspondent that while the available documents have been shared with the auditors, the specific documents in question would be provided during the investigation and the Public Accounts Committee (PAC) meeting. In response, the Audit Department has recommended a comprehensive re-audit of all payments made through the SAP system, a full-scale inquiry into the matter, and strict action against those found responsible to prevent further misuse of public funds.

Sources told this correspondent that the matter of grave concern is that SAP user authorisation is the sole responsibility of the Accountant General, thereby authorising Treasury Department staff with SAP users constitutes grave negligence on the part of the Accountant General. He further elaborated that accounting of daily withdrawals from the government treasury is recorded by the DAO office and is reported to the Accountant General daily. Similarly, all bank transactions related to government payments and receipts are also reported to the AG. Against this backdrop, how were the cheques not accounted for? This shows dereliction on the part of account authorities.