FABS advice on Fraudulent Withdrawal in Loralai District dt 12.09.2013

FABS advice on Fraudulent Withdrawal in Loralai District dt 12.09.2013

In recent developments concerning financial mismanagement, the FABS team has issued a crucial advisory regarding a fraudulent withdrawal incident involving Rs. 14.65 million by officers from the Livestock Department in District Loralai. This incident has drawn attention to significant lapses in administrative and supervisory controls, prompting urgent measures to prevent future occurrences. This advisory provides a comprehensive review of the situation, the systemic response, and recommended actions for ensuring robust financial control.

Overview of the Fraudulent Withdrawal

On August 16, 2013, RD PIFRA Balochistan issued a letter (No. PIFRA-WRDB/1003) addressing the Director Admin (PIFRA), which highlighted the fraudulent withdrawal of Rs. 14.65 million by officials in the Livestock Department of District Loralai. This communication was subsequently forwarded to the FABS team for further examination.

Examination and Findings

The FABS team, tasked with reviewing the incident, conducted an in-depth analysis to determine whether the fraud resulted from a system failure or from willful negligence and collusion. The investigation revealed that:

1. Administrative Control Lapses: The primary issue identified was a significant breach in administrative controls within the District Accounts Office of Loralai. This breach facilitated the unauthorized withdrawal of substantial funds.
2. System Strengths: Despite the lapses, the supervisory controls in the Finance Department of Balochistan detected the fraud through remote access tools. By leveraging controlling mechanisms such as reports and system logs, they identified the culprits and recovered the misappropriated amount. This highlights the effectiveness of system tools in detecting and rectifying financial misconduct.

Recommended Actions

In light of the findings, several corrective measures are re-emphasized to enhance financial oversight and prevent similar incidents in the future:

1. Restricted Access to SAP Credentials: SAP usernames and passwords should never be shared with unauthorized personnel, even within the office. Strict adherence to this protocol is essential for safeguarding system integrity.
2. User-Specific Authorization: Implement user-specific authorization for workflow and non-workflow entries through the document type table. This measure ensures that only authorized personnel can make adjustments to transfer entries.
3. Scrutiny of Re-Appropriation Orders: Ensure rigorous scrutiny of re-appropriation orders in conjunction with budget allocations provided by the sanctioning authorities before making any system entries. This process will help to avoid unauthorized financial adjustments.
4. Cheque Issuance Protocols: All cheques should be issued in the name of the payee or vendor, not the DDO (Drawing and Disbursing Officer), to prevent misuse of funds.
5. Refresher Training: Organize refresher training sessions for District Accounts Officers to ensure they are well-versed in generating SAP reports and logs. Continuous education on system functionalities and fraud detection will enhance their capability to manage financial transactions effectively.
6. Review of Past Entries: The Accountant General Quetta is advised to review financial entries made by staff across other districts, with particular attention to entries during the months of May and June. This review will help identify any irregularities or patterns indicative of fraud.
7. Establishment of a Monitoring Cell: A dedicated monitoring cell should be established in the AG Office Quetta. This cell will utilize tools such as BTS (Business Transaction System), BERs (Business Event Reports), and system logs to remotely monitor DAO transactions, ensuring timely detection and resolution of potential issues.

Implementation and Compliance

For effective implementation of these recommendations, the following steps should be undertaken:

1. Immediate Action: Ensure that the recommended actions are promptly communicated to all relevant departments and personnel. Establish a timeline for implementing these measures and conduct regular follow-ups to ensure compliance.
2. Regular Monitoring: Continuously monitor the effectiveness of the implemented measures. Regular audits and system reviews should be conducted to maintain a high standard of financial integrity.
3. Feedback Mechanism: Develop a feedback mechanism to gather input from District Accounts Officers and other stakeholders on the effectiveness of the new measures. Use this feedback to make necessary adjustments and improvements.
4. Documentation and Reporting: Maintain detailed documentation of all actions taken in response to this advisory. Regularly report on the progress and effectiveness of the measures to the relevant authorities.

Conclusion

The fraudulent withdrawal incident in Loralai District underscores the need for stringent financial controls and vigilant monitoring. By adhering to the guidelines set forth in this advisory, agencies can enhance their financial management practices, prevent future fraud, and ensure that public funds are managed with the utmost integrity. The steps outlined are designed to reinforce administrative and supervisory controls, leveraging system tools to detect and address financial irregularities effectively.