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December 7, 2018

Finance ministry to conduct third-party audit of TCP’s subsidy claims

Business

December 7, 2018

KARACHI: Government decided to conduct third-party audit of subsidy claims of the Trading Corporation of Pakistan (TCP) – a move that is likely to aggravate financial strains of the state-owned grain trader already awaiting Rs10 billion payments on different heads, well-placed sources said on Thursday.

A TCP official confirmed that ministry of finance linked the settlement of subsidy claims to a third-party audit and reconciliation of commodity operation financing.

“This will be the first ever third-party audit of subsidy claims,” the official said.

The official said the audit aims at streamlining the finances of the corporation and plugging leakages.

Government gives financial assistance on urea, sugar and various commodities to ensure protection from price hike.

TCP is the principal trading arm of the government and execute operations on the directives of the federal government. It imports essential commodities to help ensure their availability to the common man at affordable prices.

TCP intervenes in the market to ensure fair price to growers, as well as to preempt hoarding and profiteering.

Sources said delayed payment of subsidy and other dues increase cost of borrowing for TCP, which pays millions of rupees interest to banks on financing of the commodities.

TCP’s receivables from various government institutions amount to Rs10.79 billion, according to the latest financials. Other receivables include Rs3.54 billion including mark-up and other charges from sugar mills on account of sugar not supplied by them under the contractual terms.

TCP filed suits in Sindh High Court for recovery of the receivables and the matter was referred to the National Accountability Bureau.

The audit will scrutinise and check veracity of commodity-wise subsidy claims, year-wise breakup of subsidy claims and receivables from various agencies.

“The scope of the planned audit includes reconciliation of commodity operation financing for urea, sugar, wheat, cotton and rice with account receivable and bills payable including markup thereon, separating impact of markups on pending subsidy, accounts receivable and payable to government of Pakistan,” the official said.

“The audit will also cover compilation and verification of procurement cost of commodities as well as sales and accounts receivable of commodities.”

TCP has already invited bids from category-A chartered accountant firms on the panel of auditors maintained by State Bank of Pakistan having at least eight partners, global affiliation and experience of subsidy audit of government organisation for the third party audit of subsidy.

The auditors are required to compile and verify incidental costs of commodities, TCP’s commission income, mark-up on commodities and urea, sugar, wheat, cotton and rice related subsidy receivable of all commodity operations separating payable to government on all projects.

Auditors will also develop year-wise audit files consisting of working of subsidy backed by reports, documents’ copies provided by the company for each commodity and year separately.

The official said auditors might rely on the multiple evidences of receipts for the verification of price differential paid by National Fertilizer Marketing Limited to TCP and subsequent effect thereof on the subsidy.

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