Ten-year (2008-2017) PIA Audit Report

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Ten-year (2008-2017) PIA Audit Report

Post by Abbas Ali » Sun Aug 12, 2018 6:05 pm

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According to news sources, Chief Executive Officer (CEO) PIA Musharraf Rasool Cyan has issued a show cause notice to Chief Financial Officer (CFO) PIA Nayyar Hayat over irregularities in billions of rupees observed in ten-year (2008-2017) PIA audit report.

Government of Pakistan had arranged around 31 billion rupees in bailout packages for PIA but on the other hand PIA finance fund section shows around 23 billion rupees received by the airline.

Government of Pakistan had given guarantees for for 177 billion rupees for PIA but airline's finance depart shows government guarantees for 175 billion rupees.

The Supreme Court of Pakistan is seeking PIA audit report for the last ten years.

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Re: Billions of Rupees Irregularity Observed in PIA Audit Report - Airline's CEO Issues Show Cause Notice to CFO

Post by Abbas Ali » Mon Aug 13, 2018 5:26 pm

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Re: Billions of Rupees Irregularity Observed in PIA Audit Report - Airline's CEO Issues Show Cause Notice to CFO

Post by Abbas Ali » Wed Aug 15, 2018 1:44 pm

PIA’s 10-year financial documents summoned by Auditor General for review

By APP - August 14, 2018

ISLAMABAD:
Pakistan International Airlines (PIA) has been asked to submit its financial documents for the last ten years for review by the Auditor General of Pakistan (AGP).

The decision to retrieve these documents was made on the directives of the Supreme Court of Pakistan after the Auditor General shed some light on the disclosures made by the national carrier.

According to the office of the Auditor General, PIA received a sum of Rs31 billion from the commerce ministry, whereas the amount disclosed by the management of the firm stood at Rs23.565 billion.

Similarly, as per the AG, PIA received a sum of Rs177.23 million from the finance ministry, but the amount disclosed stood at Rs175.086 million on paper.

Source: Pakistan Today
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Re: Billions of Rupees Irregularity Observed in PIA Audit Report - Airline's CEO Issues Show Cause Notice to CFO

Post by Abbas Ali » Tue Aug 21, 2018 6:00 pm

Under Supreme Court orders, records of PIA offices in Peshawar, Swat, Abbotabad, Chitral, Dera Ismail Khan and Bannu also being audited.

https://www.express.com.pk/epaper/PoPup ... e=20180821

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Re: Billions of Rupees Irregularity Observed in PIA Audit Report - Airline's CEO Issues Show Cause Notice to CFO

Post by Abbas Ali » Sat Sep 01, 2018 3:52 pm

PIA forensic audit report has been deposited at the Supreme Court. The court will hear case on ten-year audit of the airline on September 3.

In the report, warning of strict action has been given to senior management for delay in supply of record.

Show-cause notice has been issued to Chief Financial Officer (CFO). Three general managers have been reprimanded.

Record containing seven thousand pages has been provided to audit officials.

Action is sought for not providing record of 34 items sought by audit officials.

323 items provided to audit officials in response to 39 letters.

Chief Executive Officer (CEO) PIA Musharraf Rasool has submitted an affidavit with the submitted report.

CEO PIA has directed airline's Chief Human Resources Officer (CHRO) to take action against those who failed to provide the required record.

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Re: Billions of Rupees Irregularity Observed in PIA Audit Report - Airline's CEO Issues Show Cause Notice to CFO

Post by Abbas Ali » Sun Sep 02, 2018 2:55 pm

Action taken against non-cooperative officers, PIA tells SC

Syed Sabeehul Hussnain

ISLAMABAD -
Chief Executive Officer Pakistan International Airline Corporation Limited Musharraf Rasool Cyan on Saturday informed the Supreme Court that chief financial officer of the national flag carrier had been issued show cause notice for not providing accurate data to audit team.

He stated that three general managers of the commercial department had also been reprimanded for the same reason while chief human resource officer had been asked to initiate disciplinary action against non-cooperative employees.

He further informed the top court that he had also procured undertakings from the senior management team of the PIACL on July 30 to provide any or all information as and when required by Auditor General of Pakistan.

Cyan submitted his affidavit in the top court on the issue of special audit of national flag carrier.

The top court on June 30, in the matter regarding selling of national assets including those of the PIA at throw away prices, had directed the auditor general for carrying out a special audit of the PIA accounts to ascertain billions of loss incurred. The auditor general was also directed to submit a comprehensive report before the top court after the audit.

A 3-judge bench headed by Chief Justice Mian Saqib Nisar and comprising Justice Umar Ata Bandial and Justice Ijazul Ahsan will take up matters relating to the PIA on September 3.

Cyan in his affidavit further stated that concerned officials had been informed in clear terms that further disciplinary action would follow if compliance was not forthcoming and as required. He added that apart from the CFO and the general managers, all had complied with the requisite information meant for audit.

“The chief financial officer remains under disciplinary proceedings for non-compliance,” Cyan stated.

In order to aid the special audit, CEO Cyan said, he had asked the chief human resource officer of the PIA to start disciplinary proceedings against those employees who refused to comply with remaining 34 items pending in requisition made by director commercial audit or those not meeting the prescribed deadline of 48 hours.

PIA SEO Cyan said that he had endeavoured to ensure PIA’s compliance to orders of the top court, claiming that this endeavour would be instrumental in successful turnaround of the airline. He said that he had issued necessary binding directives to chiefs in the PIA and his team to extend full cooperation in compliance, adding that he had assigned one person to report directly as a focal person in facilitating the audit team.

“Till date, the PIA has received 39 requisitions from the auditors for 357 items spaced over 8 weeks, which was a massive undertaking involving voluminous record. The PIA has complied with the majority of requisitions,” the affidavit stated, adding that the compliance ratio was 90 percent. “Items complied with includes data that had been partially received and under review stood at 74, while those which were replicated or repeated were 11 as it concerned multiple departments. Moreover, 7 items about the PIA have been omitted,” the affidavit stated.

However, it added, the speed of compliance slowed down when the PIA was inundated with requisitions in the first fortnight of August 2018. “The audit team made almost half of total requisitions during this period. Requisitions required a lot of efforts in terms of time and determination to respond as a large number of these were not just cursory summarisation but an in-depth analysis by a number of cross-functional professionals,” the affidavit further stated.

Over 60,000 pages of record, 150 GB of soft data and close to 24,000 exclusive man hours of the teams addressing requirements of the auditors have been invested notwithstanding unacceptable traditional slow-going attitude of personnel towards audit and accountability initiatives, antiquated systems, dilapidated manual record and absence of robust record upkeep system across the board in the company, the CEO stated in his affidavit.

“The fact that the PIA’s employee skill sets and workloads are handled by very few key professionals, the same individuals balancing operations, providing record simultaneously and managing a number of turnaround initiatives reaching culmination was also achieved while prioritising work with the audit team.” The CEO in his affidavit further claimed that measures had been taken to ensure micro-level compliance.

These measures include appointment of a senior person on fulltime basis to coordinate procurement of records and information from all the 18 departments reporting to the CEO, he said.

The CEO further claimed that his office maintained all requisition flows and its record in addition to their subsequent assignment to concerned departments as well as a follow-up on the requisitions assigned to officers in the relevant departments.

It was further claimed in the affidavit that the CEO’s office was also facilitating the departments in their interaction with the auditors and helped them in understanding, decoding, deciphering and interpreting the data and the record requisitioned.

“More than 45 emails and written communications have been issued from deponent (CEO PIA) office in the last 2 months on the subject, demanding timely submission and forewarning reprimands in case of non-compliance,” he stated.

Regular meetings have been organised on daily and weekly basis to reconcile information/data and records received between the focal person and the auditors and between the deponent’s chiefs, it further added.

“Over 150 peer-to-peer sessions have been held, 6 joint team meetings chaired by the deponent along with complete audit team and departmental heads have been organised. Some meetings have even been held over the weekends,” he stated.

“Information, records and data that were missing or unavailable have also been traced and secured. Maximum co-operation has been extended and will continue to be extended,” he narrated.

The current status had also been shared with the audit team by the CEO’s focal person along with the names of the officials responsible for providing the remaining 34 items requisitioned, he said.

Source: The Nation
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Re: Billions of Rupees Irregularity Observed in PIA Audit Report - Airline's CEO Issues Show Cause Notice to CFO

Post by Abbas Ali » Mon Sep 03, 2018 3:18 pm

Today, the Supreme Court of Pakistan was informed that CEO PIA Dr. Musharraf Rasool Cyan cooperated in submitting audit record of the airline.

However, some other officials of the airline did not cooperate in submitting audit record.

The court was informed that ninety-five percent of audit record has been submitted. Remaining five percent of audit record is being located.

Next hearing of the case will take place on September 6.

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Re: Billions of Rupees Irregularity Observed in PIA Audit Report - Airline's CEO Issues Show Cause Notice to CFO

Post by Abbas Ali » Tue Oct 02, 2018 2:13 pm

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Ten-year audit report of PIA has submitted to the Supreme Court of Pakistan. According to the report, PIA had suffered loss of more than 360 billion rupees by the end of 2017. The airline is suffering loss on every route, says the report.

The report recommends:

* Review of Pakistan's National Aviation Policy.
* Review of agreements with foreign airlines.
* Formation of effective Board of Directors for PIA.
* Appointments on merit basis.
* No government interference in PIA matters.

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Re: Billions of Rupees Irregularity Observed in PIA Audit Report - Airline's CEO Issues Show Cause Notice to CFO

Post by Abbas Ali » Tue Oct 02, 2018 2:50 pm

The Supreme Court of Pakistan has sought PIA reply within a month on airline's ten-year audit report submitted at the court.

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Re: Billions of Rupees Irregularity Observed in PIA Audit Report - Airline's CEO Issues Show Cause Notice to CFO

Post by Abbas Ali » Wed Oct 03, 2018 2:18 pm

AGP finds fault with PIA business model

By Hasnaat Mailk

Published: October 2, 2018

ISLAMABAD:
The Pakistan International Airlines (PIA) has been run like a non-business entity, governed by an unprofessional Board of Directors (BoD) managed by a chief executive office (CEO) lacking industry specific experience, says a special audit report on the 10-year performance of the flag carrier.

The report has been submitted by the Auditor General of Pakistan (AGP), who was directed by the Supreme Court on June 30 to conduct a special audit of the PIA to ascertain the causes of accumulated losses sustained by it during the last ten years.

The special audit was conducted from the month of July to September. It revealed that the accumulated loss as of Dec 31, 2008 was Rs72.353 billion which increased to Rs360.117 billion by Dec 31, 2017.

The report points out absence of prudence, due diligence and best industry practice in the airline’s policymaking and also highlights ad-hocism in decision making, poor practices in human resource, procurement, marketing, contract, fleet, fuel, inventory and financial management.

Giving seven recommendations, AGP suggests that the National Aviation Policy and the ASAs with Gulf and Turkish Airline be reviewed on the basis of bilateral commercial interests.

Largest passenger aircraft lands at Islamabad airport

“Likewise, an efficient BoD be constituted to turn around the airline. CEOs/MDs be appointed on merit. Unnecessary interference from the government be stopped. Interference of various staff/officers association be stopped forthwith. Policy on merit based appointment/transfer/postings be adopted and strong internal control be adopted,” it adds.

The report says so far 44 BoDs of the PIA were nominated by the government from 2008-17. None of them had experience of aviation industry and majority of the members were serving or retired civil or military bureaucrats, politicians and businessmen.

Due to lack of relevant experience, the successive BoDs neither efficiently formulated any strategic business plans or policies. Likewise, absence of secretary finance in most of the BoD meetings was also a serious concern.

The auditor also observes violation of the prevailing rules and regulations in the appointment of MDs and CEOs. Exorbitant pay and allowances were granted to the MDs and CEOs in violation of standing instructions of the Finance Ministry causing extra burden of Rs98.111 million to the corporation.

PIA’s CFO removed

“Likewise, the appointments of CEOs and MDs were not transparent,” it says.

The report reveals that almost 457 employees including 16 pilots had fake degrees. Seven of these employees are still working on stay order. The management misused the policy of regularisation of the contract employees.

It says the flying-grounding rights accorded to Gulf and Turkish airlines especially after Aviation Policy 2015 were beyond any justification and were given without considering bilateral commercial interests.

During 2008-17, the international airline market growth of Pakistan was 54 per cent whereas capacity granted to foreign carriers by government of Pakistan was more than 300 per cent.

In 2017, 4.72 million passengers from Pakistan travelled to third countries through Gulf & Turkish carriers, depriving the national airlines of their potential share in revenue of Rs117 billion.

The report also reveals that rate analysis proved that the management acquired aircraft on the dry lease at exorbitant rates in comparison to other airlines. The audit points out losses and irregularities in dry and wet leases, having financial impact of Rs56 billion.

It says due to unprofessional way of fuel hedging, the PIA sustained loss of Rs4 billion. The management wasted Rs26 .5 million in 2015 on the appointment of fuel hedging consultant without achieving objectives of the consultancy services.

The audit also observes an increase in litigation. “Out-of-court settlement cases at the UK stations were highly objectionable involving billions of rupees,” it adds.

Source: tribune.com.pk

PIA’s continued losses due to political interference, lack of professional leadership: audit report

LAHORE:[/b] A 10-year special audit report of the Pakistan International Airlines (PIA) presented in the Supreme Court (SC) on Tuesday declared the national carrier’s long ongoing losses a result of political interference and absence of professional leadership.

The 500-page report prepared by chartered accountancy firm, A.F. Ferguson identified the losses sustained by PIA as well as, the causes behind them.

According to the audit report, the national carrier accumulated a total of Rs73bn loss in 2009 which escalated to a whopping Rs 360.39bn by 2017.

The report further details all the factors that cause PIA’s annual losses and poor financial performance. Some of the reasons that have been stated are inefficient fuel management, unnecessary expenses on the crew, performance of subsidiaries, poor supply chain and contract management, inefficient engineering and maintenance department among others while the root cause for all of PIA’s troubles has been ascertained to be the national carrier’s top leadership.

“PIAC has been run like a non-business entity, governed by the non-professional BoDs, managed by CEO lacking industry-specific experience,” the report states.

Moreover, the audit report recommends the appointment of CEOs and MDs on merit and putting an end to “unnecessary interference from government” as a must if the airline wants to improve its performance.

The report further advised that the “National Aviation policy, ASAs with Gulf and Turkish Airline be reviewed” and “efficient and dynamic BoD be constituted to turnaround the airline”.

The SC has directed PIA to submit its response to the audit by October 31.

Source: Pakistan Today

AGP report: PIA losses jump to over Rs 360 billion

OCT 3RD, 2018

ISLAMABAD
- The Auditor General of Pakistan (AGP) report said that accumulated losses of Pakistan International Airlines Corporation (PIAC) up to December 31, 2017 were Rs 360.117 billion while these were Rs 72.353 billion on December 31, 2008.

The Supreme Court on June 30, 2018 had directed the AGP to conduct a special audit of the PIAC for the last 10 years (2008 to 2017). The purpose of the audit was to ascertain the causes of accumulated losses sustained by the PIAC.

The report is based on financial statements, Board of Directors (BoD) minutes, policies and decision, record relating to appointment (BoD member, MDs/CEOs etc), procurement matters, acquisition of aircraft on dry/wet lease, inventory issues, contract management, financial management, fuel hedging and conservation, revenue losses through leakages and operations, etc.

The report pointed out that the main cause of accumulated losses was the absence of the professional and experienced leadership. The federal government being the majority shareholder i.e. 84.64 % nominated 9 out of 11 members of the Board of Directors including chairman. So far 44 members of the BoD of the PIAC were nominated by the various governments during 2008-17. None of them had relevant experience of the aviation industry. The majority members were serving/retired civil/military bureaucrats, politicians and businessmen. The role of the BoD committees' was also not up to the mark in guiding the board in various strategies issues. The exorbitant pay and allowances were granted to MDs/CEOs in violation of instruction of the Ministry of Finance.

The report said that the review of the Aviation Policies 1998 and 2000 revealed that the Aviation Policy 2015 did not safeguard the interest of the Aviation Industry and Pakistan. The flying/grounding rights were accorded to Gulf and Turkish carriers especially after Aviation Policy 2015. In 2017, 4.72 million passengers from Pakistan traveled to third countries under sixth freedom through Gulf and Turkish carriers thereby depriving national airlines of their potential share in revenue of Rs 117 billion.

In 2008, the PIAC fleet consisted of total aircraft (owned 35, leased 8), while in 2017 PIAC fleet comprised total aircraft - owned 12 and leased 24 (dry lease 20, wet lease 04). The audit observed the feasibilities of dry leased aircraft were prepared in fictitious figures without proper justification. The audit highlighted the losses/irregularities in dry/wet lease having financial impact of Rs 56 billion.

The report said that no sound mechanism existed in determination of air fares. Schedule of power is silent on competent authority to approve fares. As per practice in vogue, the director commercial was final authority to determine fares, both for domestic and the international routes. The record of fares was not maintained properly either by revenue management or the revenue accounting department. There was no involvement of BoD in approving fares.

The PIAC incurred losses on almost every station/route. The decisions were based on ad hoc basis without due diligence and farsightedness, causing shrinkage of its network. The audit pointed out irregularities/losses of Rs 8.5 billion.

The role of engineering & maintenance (E&M) department was insignificant in the process of induction of aircraft (dry/wet lease basis and ownership purchases). The minutes of technical evaluation committees were neither properly written nor kept for administrative and audit purpose. The chief technical officer and other chief engineers of the E&M department failed to provide record of 25 aircraft, which have been grounded permanently during 2008 to 2017. The audit pointed losses/irregularities of Rs 31.12 billion.

The report also observed the gross irregularities including non-disposal of inventory of Rs 11.61 billion, unnecessary purchase of spare parts at higher rates worth Rs 362.5 million, non-settlement of rejected/defective inventory of Rs 67.48 million, purchase of technical items at higher prices i.e. Rs 418.74 million, and fraudulent contract agreement for sale of surplus inventory of Rs 1.577 billion.

The report said that the PIAC supply chain department failed to perform its primary functions. The audit observed the number of cases of procurements at exorbitant rates, excessive procurements, frequent violation of Public Procurement Rules, 2004 and PIAC own rules and regulations. Sale of A-310 aircraft, up-gradation of cabin and purchase of iPads on rental basis were serious issues. The audit pointed out losses/irregularities of Rs 3.5 billion.

The fleet choice and the lack of consistencies in flying programme had severely restricted the ability to sell cargo space. From 2010 to 2017 total unutilized cargo space was 56 %. The audit observed the losses/irregularities due to sale of aircraft space on 'hard block' basis worth Rs 500 million, decrease in revenue due to imprudent award of contract to M/s Globe Air of Rs 675.87 million, default by the cargo agents of Rs 235.262 million and violation of rules in award of Cargo GSSAs.

The report says that both the cockpit and the cabin crew were under-utilized. Pilots were enjoying guaranteed minimum 75 flying hours per month whether they fly or not. The audit further observed that duty timings of the cabin crew were relaxed in comparison with Indian and European airlines, which caused an extra burden of Rs 2 billion.

The PIAC incurred heavy expenditure of Rs 436.344 billion on account of jet fuel during the last 10 years, which was around 44% of the revenue during 2008 to 2017. The fuel expenditure was highest 57% in 2013 and lowest 30% in 2016. Due to non-professional way of fuel hedging, the Corporation sustained a loss of Rs 4 billion.

The report noted that Roosevelt Hotel, New York, USA, earned an overall profit of US $ 49.862 million during 2008 to 2017, but sustained loss of US $ 5.19 million during 2015 to 2017. Skyrooms sustained an accumulated loss of Rs 140.16 million as on December 31, 2017.

Internal Audit Department of PIAC remained ineffective in ensuing compliance with relevant rules/regulations and financial propriety which was evident from the fact that the audit observation involving financial impact of Rs18.25 billion remained outstanding, while audit paras of Rs 24.35 billion were settled without adhering to proper procedures and supporting documents. Instead of enhancing the in-house capacity of internal audit department, the function of the department were co-sourced with charted accountant firms having financial impact of Rs 71.48 billion.

The report concluded that the PIAC has been run like a non-business entity, governed by non-professional BoD, managed by CEO lacking industry specific experience, adhocism in decision making, poor HR, procurement, marketing, contract, fleet, inventory and financial management.

The report recommended that National Aviation Policy and ASAs with Gulf and Turkish airlines be reviewed on the basis of bilateral commercial interests. An efficient and dynamic BoD may be constituted.

The CEO/MDs be appointed on merit. Unnecessary interference from the government be stopped. Interference of various staff/officer associations be stopped forthwith. The policy of merit-based appointments/ transfers/ postings be adopted.

Source: brecorder.com

PIA being run like non-business entity: AGP

By Nasir Iqbal | 10/3/2018

ISLAMABAD:
The Auditor General of Pakistan (AGP) has blamed the absence of professional and experienced leadership for the present state ofaffairs ofthe PakistanInternational Airlines (PIA), regretting that it was being run like a non-business entity.

A comprehensive audit report submitted by the AGP to the Supreme Court on Tuesday painted a gloomy picture of the financial health of the national airline, highlighting that 44 members of the PIA Board of Directors (BoD) were nominated by the government during 2008-17, but none of them had relevant experience in the aviation industry.

According to the report, most of the board members were either serving or retired civil or military bureaucrats, politicians or businessmen and due to lack of relevant experience the successive BoDs neither efficiently formulated any strategic business plans or policies nor effectively executed the best practices of the airline industry.A three-judge SC bench headed by Justice Sheikh Azmat Saeed had taken up a case on reports that the PIA accumulated Rs360 billion losses by December 2017 and its total liabilities amounted to Rs406bn against the assets of Rs111bn. On June 30, the apex court had ordered a comprehensive audit of the national airline.

The special audit report highlighted the absence of prudence, due diligence and best industry practice in policymaking, ad hocism in decision-making, poor human resource procurement, marketing, contract, fleet, fuel, inventory and financial management.

The report recommended revision of the national aviation policy with the Gulf and Turkish airlines on the basis of bilateral commercial interests, besides constituting an efficient and dynamic BoD to turn around the airline. It called for appointing chief executive officers (CEOs) and managing directors (MDs) on merit and discouraging unnecessary interference from the government and staff/ officers association. The report suggested merit-based appointments/ transfers/postings and strong internal control.

The report regretted that the role of BoD committees was not up-to-themark in guiding the board in different strategic issues like fleet/financial/ human resources and contract management. Absence of the finance secretaryfrom most of the BoD meetings was also a serious concern.

The report also highlighted violations of prevailing rules and regulations in the appointment of MD/CEOs, besides exorbitant pay and allowances given to them against the standing instruction of the finance ministry, causing extra burden of Rs98.2 million on the PIA. Similarly, the issue of transparency and serious irregularities were also noticed in fixing the pay and allowances of other officers on personal liking and disliking.

According to the report, the overall human resource management is also in a pathetic state with no uniform meritbased policy for appointment, promotion and postings. Foreign postings are made on favouritism/nepotism without observing merit, resultantly sales targets are compromised.

Almost 457 employees are appointed on fake degrees, including 16 pilots of which seven are still working on stay orders,52 engineering staff or ofEcers of which 36 still on service, 67 officers and 33 airhostesses.

Referring to the skewed aviation policy, the report said the aviation policy of 2015 did not safeguard the interests of the aviation industry. The flying/ grounding rights accorded to the Gulf and Turkish carriers, especially after the 2015 policy, were beyond any justification and without considering bilateral commercial interests.

Source: DAWN

PIAC loss swelled to Rs360b in last 9 years, SC informed

Syed Sabeehul Hussnain

October 03, 2018

ISLAMABAD
- The special audit conducted by Auditor General of Pakistan on Tuesday revealed before the Supreme Court that the accumulated loss of the Pakistan International Airline Corporation (PIAC) mounted from Rs72.353 billion to Rs360.117 billion in the last nine years.

The audit report said that the accumulated loss of the PIAC was Rs72.353 billion on December 31, 2008, which was mounted to Rs360.117 billion on December 31 of 2017.

The report of special audit further revealed that losses to the tune of Rs56 billion incurred on account of leases while passengers shifted to other international airlines costing loss of Rs117 billion to PIAC.

The damning special audit report comprising 500-pages was submitted by Additional Attorney General Syed Nayyar Rizvi in the top court in a suo motu case regarding handing over profitable routes to other airlines.

The special audit stated that none of appointees by Government of Pakistan had relevant experience in Aviation Industry while majority of members were serving and retired civil military bureaucrats, businessmen and politicians.

"So far, 44 members of Board of Directors (BoD) of PIAC were nominated by the government during 2008-17. Due to lack of relevant experience, the successive BoDs neither efficiently formulated any strategic business plan/ policies, nor effectively executed the best practice of the airline industry. Absence of Secretary Finance is most of the BoD meetings was also serious concern," the report stated.

The special audit observed that exorbitant pays and allowances were granted to Managing Directors (MDs) and Chief Executive Officers (CEOs) in violation causing extra burden of Rs98.111 million on Corporation.

Similarly, appointments of DMDs/Chiefs/Executives Directors in the Corporation were also not transparent and serious irregularities including the fixing of pays and allowances on liking and disliking basis were pointed out in the audit report.

“Thus, appointment on key managerial positions without observing the principle of right person at right place severely created efficiency issues leading towards mismanagement.”

The overall HR management, the report stated, was in pathetic state having no uniform merit policy for appointment, promotion and postings. Foreign postings were made on favouritism without observing merits resultantly the sales targets were compromised.

“Almost, 457 employees were appointed on fake degrees includes 16 pilots, 52 Engineering staff, 67 officers from AM to DGM and 33 airhostesses.”

Further, PIAC suffered loss of Rs160 million due to non-commercial decision of establishing flying academy. Despite financial crunch, policy of granting vehicles at depreciating rates to the employees even more than once was completely unjustified, the report added.

Review of the Aviation Policies revealed that Aviation Policy 2015 did not safeguard the interests of Aviation Industry. The flying and grounding rights accorded to Gulf and Turkish carriers especially after Aviation Policy 2015 were beyond any justification and without considering bilateral commercial interest.

“During 2008-2017, the international airlines’ market growth of Pakistan was 54 per cent, whereas capacity granted to foreign carriers by GoP was more than 300 per cent.”

Regarding skewed aviation policies, the special audit stated, “In 2017, 4.72 million passengers from Pakistan travelled to ‘third countries’ under sixth freedom through Gulf & Turkish carriers thereby depriving national airlines of their potential share in revenue of Rs.117 billion.”

Audit observed that feasibilities of dry leased aircrafts were prepared on fictitious figures without proper justification. Marketing and commercial departments devised high estimates of revenue before induction of aircrafts but the same were never achieved.

Rate analysis proved that management acquired aircrafts on drying lease at exorbitant rates in comparison to other airlines. Audit pointed out losses and irregularities in terms of leases having financial impact of Rs.56 billion.

Interestingly, in PIAC, no sound mechanism exists for determination of Air Fare. “As per practice in vogue, Director Commercial was final authority to determine the fare, both for domestics as well as international routes. It is manual system based on acumen of marketing officers without supporting evidence.”

“There was no involvement of Board of Directors in approving the fare. Thus, fare preparation was inefficiently managed, causing mismanagement in RBD/leakages and revenue losses. Audit pointed out irregularities/leakages worth Rs164.15 billion.”

The report stated that PIAC incurred losses on almost every station and routes adding that there was huge difference in target versus actual sales, showing lack of professionalism in planning and execution of commercial strategies.

“Decisions were based on ad-hoc basis without due diligence and far sightedness causing shrinkage of its network. Audit pointed out irregularities/losses of Rs8.5 billion.”

Since 2014, expenditure under Engineering and Maintenance (E&M) Department increased beyond three-fold since induction of aircrafts were not compatible with available engineering facilities, therefore, engines & major components were sent abroad for overhauling and repair.

“The Chief Technical Officer (CTO) and other Chief Engineers of the E7M Department failed to provide record of 25 aircrafts which have been grounded permanently during 2008-2017. Audit pointed out losses/irregularities of Rs31.124 billion.”

Audit observed gross irregularities including non-disposal of inventory of Rs11.61 billion, unnecessary purchase of spare parts at higher rates worth Rs362.5 million, non-settlement of rejected/defective inventory of Rs67.48 million, purchase of technical items at higher prices of Rs418.74 million and fraudulent contract agreement for sale of surplus inventory of Rs1.577 billion.

Unfortunately, the report stated, PIAC’s Supply Chain Department failed to perform its primary function. Audit observed number of cases of procurement at exorbitant rates, excessive procurements, frequent violation of PPRA Rules and PIAC’s own ruled, up-gradation of cabins, purchase of iPads on rental basis were serious issues. Audit pointed out losses/irregularities of Rs3.5 billion on this account.

Regarding mismanagement of cargo revenues, the report stated that total utilized cargo space from 2010 to 2017 was 56 percent. The audit observed losses due to sale of aircraft space on ‘hard block’ basis worth Rs500 million, decrease in revenues due to imprudent award of contract to M/s Globe Air of Rs675.87 million, default by the Cargo Agents of Rs235.262 million and violation of rules in award of Cargo GSSAs.

“Pilots were enjoying guaranteed minimum seventy five flying hours per month whether they fly or not.” Further, audit observed that duty timing of the cabin crew were relaxed in comparison with Indian and European airlines which caused burden of more than 2 billion in last 5 years.

“Despite having own hotel at Karachi Airport, the crew was accommodated on luxurious hotels in city centers having huge financial impact on the financially crippled organization. Non-recovery of Rs1.43 billion from pilots showed level of favoritism and mismanagement in the organization.”

PIAC incurred heavy expenditure of Rs436.344 billion on account of jet fuel in last 10 years. Audit observed that no attention was paid by the successive management to adopt fuel conservation program.

“Due to non-professional way of fuel hedging, Corporation sustained loss of Rs4 billion. Management wasted Rs26.5 million in 2015 on appointment of fuel hedging consultant without achieving the objectives of the consultancy services.”

It further stated that due to non-availability of record in Pakistan, audit could not ascertain the reasons of losses and transparency in the utilization of funds by the PIAC Investments Limited (PIAIL), the subsidiary of PIAC, management. It further stated that Skyrooms, another subsidiary to PIAC, sustained accumulated loss of Rs140.169 million as on December 31 of 2017.

Audit further observed the increase in litigation due to mismanaged contract execution adding cases at UK stations were highly objectionable involving billions of rupees.

The report further stated that PIAC’s internal audit was not effective and audit paras of Rs24.352 billion were settled without adhering to proper procedure.

“Instead of enhancing the in-house capacity of Internal Audit Department, the functions of department were co-sourced with chartered accountant firms having financial impact of Rs71.48 million.”

During audit, it was observed that in many cases either important papers were missing from the files or record being not maintained at all which created doubts on the authenticity of the record.

The report recommended that National Aviation Policy as well as contracts with Gulf and Turkish Airlines should be reviewed on the basis of bilateral commercial interests. It further recommended that CEOs and MD should be appointed on merit and unnecessary interference from government be stopped.

Source: The Nation

PIA incurred Rs360 billion loss by end of 2017, SC told

ISLAMABAD:
Owing to absence of professional and experienced leadership, the national flag carrier (PIA) incurred a loss of Rs360 billion by the end of 2017.

As per the audited financial statements of Pakistan International Airlines (PIA), the accumulated losses as on December 31, 2008 were Rs72.353 billion, which amounted to Rs360.117 billion as on December 31, 2017, says the Auditor General of Pakistan in its report submitted before the Supreme Court on Tuesday. On June 30, the Supreme Court had directed the Auditor General to conduct a special audit of the PIA for the last 10 years (2008-2017) as per approved terms of reference (ToRs) and furnish a comprehensive report before it.

A two-member bench of the apex court, headed by Chief Justice Saqib Nisar, while hearing a suo motu case relating to privatisation and losses of PIA had ruled that the primary objective of the special audit was to ascertain the causes of accumulated losses sustained by the PIA over the period of last 10 years.

In its findings, the audit report observed that the PIA has been run like a non-business entity, governed by the non-professional board of directors (BoDs), managed by CEO lacking industry-specific experience. It further observed absence of prudence, due diligence and best industry practice in policymaking, ad-hocism in decision making as well as poor HR, procurement, marketing contacts, fleet, fuel, inventory and financial management.

The Auditor General recommended constitution of an efficient and dynamic BoD to turnaround the airline, besides appointing chief executive and MDs on merit. The AGP further recommended that unnecessary interference from the government should be stopped besides interference of various staff/officers associations. The audit further recommended that the national aviation policy, ASAs with Gulf and Turkish Airlines be reviewed on the basis of bilateral commercial interests.

The audit report further observed that so far 44 members of the BoD of the PIA were nominated by the government during 2008-17, but none of them had relevant experience in aviation industry. It added that majority of the members were serving/retired civil/military bureaucrats, politicians and businessmen. “Due to lack of relevant experience, the successive BoDs neither efficiently formulated any strategic business plans/policies, nor effectively executed the best practice of the airline industry,” says he audit report.

It further found violation of the prevailing rules/regulations in appointment of MDs, CEOs, granting them exorbitant pay and allowances in violation of standing instructions of Ministry of Finance causing extra burden of Rs98.111 million in the corporation. Similarly, appointment of DMDs, chief executive, directors in the corporation were also not transparent and serious irregularities, including fixing of pay and allowance on personal liking and disliking, were pointed out in the audit report.

Thus, appointments on key managerial positions without observing the principle of right person at right place created efficiency issues leading towards mismanagement and ineffectiveness in decision making and its execution.

The audit report also threw light on the HR department and termed it pathetic, having no uniform merit based policy for appointment, promotions and postings, adding that foreign postings were made on favouritism/nepotism without observing merit, resultantly the sales targets were compromised.

Source: The News
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Re: Billions of Rupees Irregularity Observed in PIA Audit Report - Airline's CEO Issues Show Cause Notice to CFO

Post by Abbas Ali » Mon Oct 08, 2018 3:46 pm

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Chairman & CEO PIA Saqib Aziz has directed heads of airline's various departments to answer questions raised on airline's audit report submitted at the Supreme Court

Questions also have been sent to airline's former CEOs and MDs.

PIA will submit answers to the Supreme Court on October 24.

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Re: Billions of Rupees Irregularity Observed in PIA Audit Report - Airline's CEO Issues Show Cause Notice to CFO

Post by Abbas Ali » Wed Oct 10, 2018 4:28 pm

PIA management has decided to take action against airline's corrupt officers following financial irregularities pointed out in special audit report submitted at the Supreme Court.

List of officers belonging to airline's marketing, finance, engineering and IT departments involved in financial irregularities is being prepared for further action.

https://www.express.com.pk/epaper/PoPup ... e=20181010

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Re: Billions of Rupees Irregularity Observed in PIA Audit Report - Airline's CEO Issues Show Cause Notice to CFO

Post by Abbas Ali » Wed Oct 17, 2018 4:25 pm

The ten year (2008-2017) PIA audit report submitted to the Supreme Court points out more than forty cases of corruption, nepotism and illegal appointments playing role in the loss of hundred billion rupees in ten years suffered by the airline.

The airline suffered loss of twenty-four billion rupees due to illegal/surplus lower grade daily wages employees.

PIA is investigating allegations and is preparing its response to objections raised in the audit report.

https://jang.com.pk/news/564293

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Re: Billions of Rupees Irregularity Observed in PIA Audit Report - Airline's CEO Issues Show Cause Notice to CFO

Post by Abbas Ali » Sun Nov 04, 2018 9:24 pm

Former Special Assistant to the Prime Minister on Aviation Capt. Shujaat Azeem has submitted his objections to the Supreme Court over the PIA audit report submitted to the court.

Mr. Azeem says that observations made against him in the audit report are baseless and irresponsible and he's been wrongly blamed for losses suffered by PIA Premier service. He had left the post of Special Aassistant to the Prime Minister on Aviation eight months before the start of PIA Premier service in August 2016.

In 2013, he left the post of chairman and board membership of Royal Air Port Services (RAPS) and on becoming adviser/assistant to the prime minister he also ended business agreement between RAPS and PIA to prevent conflict of interest.

He has appealed to the Supreme Court for removal of observations made against him in airline's audit report.

https://www.express.com.pk/epaper/PoPup ... e=20181104

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Re: Ten-year (2008-2017) PIA Audit Report

Post by Abbas Ali » Mon Nov 05, 2018 5:06 pm

From ten-year (2008-2017) PIA audit report:

Revenue
2008:
95 billion rupees
2017: 83 billion rupees

Expenditures
2008:
125 billion rupees
2017: 134 billion rupees

Loss
2008:
38 billion rupees
2017: 44 billion rupees

Accumulated Losses
2008:
73 billion rupees
2017: 360 billion rupees

Aircraft owned
2008:
35
2017: 20

Leased aircraft
2008:
7
2017: 20

International market share
2008:
41%
2017: 22%

Domestic market share
2008:
74%
2017: 58%

Passengers carried
2008:
5,600,000
2017: 5,300,000

Employees per aircraft
2008:
429 employees per aircraft
2017: 421 employees per aircraft

Permanent employees
2008:
18,000
2017: 13,000

Info Source: Dunya
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