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[AUDIT REPORT ON THE QATIA FINANCIAL STATEMENTS 1390 ] Supreme Audit Office

ISLAMIC REPUBLIC OF AFGHANISTAN SUPREME AUDIT OFFICE KABUL, AFGHANISTAN

Audit Report on the Qatia Financial Statements 1390

for the period 1 Hamal 1390 (20th March, 2011) to 29th Hoot 1390 (19th March, 2012)


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Islamic Republic of Afghanistan

Supreme Audit Office

Independent Audit Report of the Supreme Audit Office of Islamic Republic of Afghanistan on

Qatia Accounts of the Islamic Republic of Afghanistan for the period 1 Hamal 1390 (20th

March, 2011) to 29th Hoot 1390 (19th March, 2012)

Address:

His Excellency, The President of the Islamic Republic of Afghanistan Report on the State Qatia for SY 1390

We have audited the Qatia Accounts 1390 comprising Qatia statements for the Operating

Expenditure, Qatia statements for Development Expenditure and Revenue Qatia and the statement

of debit and credit of Da Afghanistan Bank (DAB) and the position of payments by the Treasury

Department.

Management’s Responsibility for the Qatia Statements of accounts

According to the provisions contained in Article 55, para 1 of the Pubic Finance and Expenditure

Management (PFEM) Law, the Ministry of Finance, Islamic Republic of Afghanistan is responsible

for the preparation and presentation the following information:

(1) Final budget reconciliation report on the budget for previous fiscal year. This shall be

submitted no later than the end of the month of Sonbola (the second quarter of the year); [and] (2) A set of financial statements compiled according to the international accounting principles that have been audited as required by Article 59 of the PFEM law.

Auditor’s Responsibility

As required by Article 59, para 2 of the PFEM Law, the Supreme Audit Office is responsible to

prepare and submit an independent report on the previous financial statements to the Government

within six months from the end of a fiscal year.

Audit Scope

We conducted our audit in pursuance to the Auditing Standards produced by International

Organization of Supreme Audit Institutions (INTOSAI). These principles and guidelines require that

we plan and perform audit to obtain reasonable assurance about whether the Qatia statements of

accounts are free from material misstatements and whether the financial transactions and

information reflected in the Qatia statements of accounts are, in all material respects, in compliance

with the authorities, which govern them. Our audit included examining, on a test basis, evidence

supporting the amounts including their authorities and disclosures in the statements of accounts.


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Summary of findings

There was a considerable delay in submission of Development, Operating and Revenue Qatia, which

were submitted after certain intervals. Development Qatia was submitted on 11th Asad and

Revenue Qatia was submitted on 16th Asad to the audit commission, which impacted the audit

process adversely. The Audit found that the previous recommendations of the SAO have not been

implementation by the MoF.

Further, the following issues are also highlighted: realization of Afs 12,141,247,430 as deficit in

development budget; increase of Afs 2,870,916,611 in the Operating Budget as budget supplement,

which has not been approved by the National Assembly; utilization of US$ 20 million for the

construction of Hairatan to Mazar-e-Sharif railways and payment of US$ 51 million as

compensation for the loss of DAB from Operating Budget, though as per Presidential Order and the

approval of the National Assembly, these amounts were due to be paid from Development Budget;

absence of information regarding Afs 37,608,250,000 paid by DAB to Kabul Bank as loan and the

non-recovery of the amount as on date; non adjustment of advance payments relating to the

previous years as well as 1390; figures in the Qatia Statements relating to advance payments not

matching with that of the AFMIS; non-included of advance payments of Afs 3934272 and Afs

3161217 relating to Bulkh and Bamyan provinces respectively; non-inclusion in AFMIS system and

Qatia Statements of expenditure of Afs 125000 and Afs 75000 pertaining to Baghlan and Kunarha

Universities; overstatement of Afs 17,350,742 in Qatia Statements relating to the MoI; adjustment

from restricted codes; recording of considerable amounts as “Not Elsewhere Classified”; entry of

one B-27 Form related to Natural Resources Development Project twice in AFMIS system; B-27

Forms in 13 development projects not matching with the Qatia Statements; the fund relating to the

Procurement of Experimentation Laboratory for Mineral Materials and Liquid Gas Project, Kabul

and Provinces, not matching with supplement Development Budget and Qatia Statements; the

amounts of the remaining balances transferred from 1389 to 1390 not matching with that recorded

in the budget supplement; improper utilization of loans though in 1390 Afs 133,686,949 has been

paid as interest on loans; incoherence in preparation of revenue planning, inaccuracy of revenue

planning, occurrence of 3.14% as deficit in realization of domestic revenue, occurrence of 9.4% as

deficit in realization of Grants, etc.

We believe that our audit of the Qatia statements and test checks provide a reasonable basis for our

opinion.

Opinion

As per Article 98 of the Constitution and Article 59 of the Public Finance and Management

Expenditure Law, we Audited Qatia Statements for the year 1390. Considering the results reached

at the end of the audit, in my opinion, Qatia Statements, present fairly, the receipts and expenditure

and comparison of budget and actual expenditure in the year ended 29th Hoot, 1390, subject to my

observations annexed herewith.

Sd/- Prof Mohammad Sharif Sharifi Auditor General Supreme Audit Office


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Audit Report on Qatia Financial Statements for the year 1390 (20th March 2011 to 29th March 2012)

Main points

What we audited

Qatia financial statements show the financial position and budget realization of the country in

a fiscal year, usually one year. The Qatia financial statements prepared by the Ministry of

Finance (MoF) have been audited by us considering the actual approved budget, along with all

other relevant documents, such as Qatia statements of budgetary units including their

expenditure Qatia, B-23 & B-27 Forms (budget adjustments and allocations), M-22 Forms

(Provincial Expenditure Reports), M-27 & M-29 Forms (Provincial and Central Revenue

Reports), T-8 Forms (Payment Reports of Mustofiats and Agencies of Da Afghanistan Bank, DA

B in provinces), Payments Reports of General Dept of Treasury and Bank Statements of DAB,

Afghanistan Financial Management Information System (AFMIS) and other relevant

documents required during the audit. In addition, we have also audited, on sample basis, a

number of M-16 Forms related to the expenditure in the Ministry of Education, Ministry of

Higher Education, Ministry of Public Health and Kabul Municipality.

We have also reviewed the performance of Treasury, Budget & Revenue departments of MoF

on budget realization.

The audit of Qatia financial statements was finished on 29th Sunbula 1391 (19th Sept 2012)

and the audit report has been submitted to the concerned entities on the above mentioned

date.

Why is it Important

Qatia financial statements provide information to the concerned authorities regarding the

budgetary performance, shortages and excesses, during the last fiscal year. It helps MoF and

the National Assembly in preparation and approving of budget for the subsequent year. In the

absence of such information, the budget will be prepared inappropriately and the budgetary

offices will face a lot of challenges in budgetary performance. Therefore, as per the

Afghanistan laws and regulations, the preparation and auditing of Qatia financial statements

is required.

What we found

We found the following irregularities during the audit:

An amount of Afs 12,141,247,430 as deficit in development budget.


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An amount of Afs 2,870,916,611 out of Afs 3,810,916,613 as budget supplement, which

was not approved by the National Assembly.

As per Act No. 10 dated 24th Mizan 1390 (16th Oct 2011) of the National Assembly and

Order No. 65 dated 20th Mizan 1390 (12th Oct 2011) of the State President, an amount of

Afs 940 million (US$ 20 million) has been approved for the construction of Hairatan to

Mazar-e-Sharif Railways. Likewise, an amount of Afs 2.397 million (US$ 51 million) has

been approved for compensation of disinvestment of Central Bank as supplement from

development budget. During the audit, it was found that these amounts have been paid

from operational budget, which is against the above mentioned act and the Presidential

order.

An amount of Afs 865,270,000 has been added to the budget of Ministry of Public Works

through B-27 Form from Afs 940 million that has been allotted for the construction of

Hairatan to Mazar-e-Sharif Railways. Later on, the amount of Afs 940 million has been

added to budget of the said ministry through B-23 Form. Though there was no misuse of

fund in this transaction, however, such acts shows lack of internal control which may

result in fraud if care is not taken.

As per DAB request and order of the council of minters, an amount of Afs 18,108,250,000

and an amount of Afs 19.500 billion (total Afs 37,608,250,000) have been given to Kabul

Bank as loan during 1389 and 1390. However, the period of the loan was three months. So

far, only Afs 2,765,526,550 of the total loan has been recovered.

An amount of Afs 791,765,614 out of advance payments during 1381 to 1387, Afs

433,867,259 out of advance payments during 1388, Afs 1, 456,255,073 out of advance

payments during 1389 and Afs 1,365,515,194 out of advance payments during 1390 have

not been adjusted so far.

In 1390, an amount of Afs 14,954,376,000 has been allotted as contingency fund that was

increased to Afs 17,351,376,000, after adding of Afs 2.397 billion for compensation of

disinvestment of DAB. This amount constitutes 11.5% of total operating budget. As per

the Qatia financial statements, an amount of Afs 16,878,211,411, which constitutes 10% of

total operating budget, has been adjusted from contingency fund.

14 budgetary units have utilized Afs 16,042,013,951 of the contingency budget, which

constitutes 95% of total budget, while 36 budgetary units have utilized only Afs

836,197,460 of the contingency budget, which constitutes 5% of total budget.

The amount of advance payments, net of advances adjusted in 1390, is overstated in Qatia

financial statements vis-à-vis the figures in the AFMIS database, i.e. amount in the AFMIS

as per the relevant codes is less by Afs 13,944,517 than in the Qatia statements. The

difference between the AFMIS figure and those included in the Qatia statements was found

to be due to exclusion of amount of advances relating to Mustofiates.


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As per information received from Bamyan and Bulkh provinces, Afs 3,934,272 and Afs

3,161,217 unadjusted advance payments of the said provinces respectively were not

included in Qatia Statements. The supporting documents for the issue have been included

in this report. There are possibilities of such errors in the other provinces as well. It is told

that this is done because of lack of capacity in the provinces.

A comparison between Qatia financial statements of Ministry of Higher Education with the

monthly report of AFMIS system revealed that an amount of Afs 125,000, expenditure of

Baghlan University and an amount of Afs 75,000, expenditure of Kunarha University, have

not been entered in the system. Also, the monthly expenditure of center and provinces are

Afs 311,156,580. However, as per summary of expenditure (consolidated sheet at the end

of 1390), this expenditure is Afs 311,188,742; hence, there is difference of Afs 32,162

between these two accounts.

The total allocation for operating budget for the Ministry of Interior after adjustments in

the allocation is Afs 37,770,011,863. However, as per the Qatia financial statements, it is

Afs 37,787,362,605, an overstatement of Afs 17,350,472 in the Qatia financial statements.

Also, as per B-27 Form, the total allocation under code 250 is Afs 22,073,750 however it is

shown as Afs 27,073,750. In addition, the total amount shown as allocated under the codes

is 2,080,060,750 though as per the B-27 Forms it comes to Afs 425,711,500.

As per Request No. 66 dated 25th Dalwa 1389 (14th Feb 2011) of the Civil Service

Commission and the Presidential order No. 7278 dated 22nd Hoot 1389 (13th March 2011),

an amount of Afs 20,475,000 has been approved to be paid from Code No. 95. However,

the amount has been paid through B-23 Form from Code No. 95 of 1390 operating budget,

which is against the Public Finance and Expenditure Management (PFEM) Law and budget

procedures relating to lapse of funds during the fiscal year.

Considerable amounts have been adjusted from contingency budget (Reserve Code) for

Peace Strengthening Commission and Scholars Nationwide Council of Afghanistan. As we

found, as per request of National Security Council and the Presidential order, an amount of

Afs 45 million has been reduced from Code no. 91 through B-23 Form and added to the

Code No. 21 & 22 (Peace Strengthening Commission). Also, as per a separate request of

National Security Council and the Presidential order, an amount of Afs 36 million has been

reduced from Code No. 91 through B-23 Form and added to the Code No. 21 & 22

(Scholars Nationwide Council of Afghanistan). Such budgetary adjustments are not in

order as the National Security Council, Peace Strengthening Commission and Scholars

Nationwide Council of Afghanistan are not budgetary units.

Amounts of Afs 1.6 million relating to Cartography and Geodesy, Afs 10 million relating to

Ministry of Rural Rehabilitation and Development and Afs 0.4 million relating to Academy

of Science have been adjusted form restricted heads (electricity consumption, water,

house taxes, communication taxes, repairing of vehicles, M&O and building repairing),

which is against article 4 of the Principle of Budget Performance.


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As per AFMIS system, an amount of Afs 1,834,885,469 and Afs 126,778,597 have been

recorded under Code No. 21128 (fees and salaries) and 22809 (goods and services)

respectively as “Not Elsewhere Classified”. The purpose of this expenditure is not clear. As

they have not been assigned any object code of expenditure.

In 1390, against total development budget appropriations of Afs 100,698,502,691, an

expenditure of Afs 49,796,569,664 has been reported, leaving Afs 50,901,939,027

unutilized. This constitutes only 49.5% utilization against the total appropriations.

An amount of Afs 5,067,500 as allocation to the Consistent Development of Mineral

Resources Project has been recorded in the Budget Dept under no. BEU-346-90 and DAD-

0534-90. The said amount has been entered in the AFMIS system twice. As per the

information received from Ministry of Mines, out of the said amount, an amount of Afs

9,611,400 was withdrawn and the remaining amount of Afs 523,600 was transferred to

the budget of 1391. The transactions are required to be audited further.

In 1389, an amount of Afs 6,339,339,139, paid in advance to a number of offices from

development budget, has not been adjusted and cleared so far.

There are some differences between the figures recorded in the Forms of 13 projects and

the Qatia financial statements. In 5 projects, the figure recorded in the relevant Forms are

overstated in comparison with Qatia financial statements and in 8 projects, the figure

recorded in the relevant Forms are understated in comparison with Qatia financial

statements.

As per the budget document, an amount of US$ 300,000 (Afs 14,100,000) has been allotted

for the procurement of experimentation laboratory for Mineral Materials and Liquid Gas

Project. However, the Qatia financial statements and the budget supplement show an

amount of Afs 48,131,999 for this purpose. Out of this an amount of Afs 34,574,585 has

been reported and Afs 34,800,711 has remained.

An amount of Afs 68,685,961,520 has been transferred from 1389 development budget to

1390 development budget. As per 1389 Qatia financial statements, the total development

budget for the 1389 was Afs 111,440,851,527 and the total expenditure was Afs

43,381,864,945, with an amount of Afs 68,058,986,582 remaining. Therefore, transfer of

an amount of Afs 626,974,938 to the 1390 development budget was in excess of available

balance.

In 1390, an amount Afs 4,822,000,000 has been considered through loans to finance

development budget. Out of that, an expenditure of Afs 1,650,870,124 has been reported,

while an amount of Afs 133,686,949 has been paid as loan (teketana).

As per revenue estimated plan, including Code no. 19 (foreign grants), an amount of Afs

161,194,454,685 is to be realized and Afs 159,805,464,488 was received out of the

estimated amount of Afs 170,764,679,512. This is a deficit of Afs 3,269,330,971, 3.14% of


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total revenue, in earning of domestic revenue and a deficit of Afs 6,300,893,856, 9.4% of

total revenue from grant.

The Revenue Estimated Plan has not been prepared in accordance with scientific

standards and performance of the departments, therefore; it has resulted considerable

differences in revenue earning.

As per national budget document, an amount of Afs 93.66 billion has been shown as

earned through domestic revenue sources. However, as per the Deputy Office of Custom

and Revenue Depart, the total revenue earned from domestic sources is Afs 104.5 billion.

This shows inconsistency in revenue estimation between two departments of the MoF.

Also, the contribution of domestic revenue in financing operating budget is Afs 84.015

billion and in financing development budget is Afs 12,139 billion, which has been

increased to Afs 14.207 billion in supplement of development budget. An amount of Afs

96.154 billion was earned from domestic revenue sources to finance development and

operating budget. Hence, the amount of Afs 93.66 billion estimated to be earned from

domestic revenue sources as per the Revenue Estimated Plan is not matching with what is

mention in the budget document.

In 1390, an amount of Afs 340,000 as “Not Elsewhere Classified” has been included in the

Revenue Estimated Plan of the central departments, but the entity that realizes and earns

the revenue is not specified.

The remaining revenue relating to 1389 to be transferred to 1390 was Afs 141,938,368

under sub code No. 11 and Afs 40,624 under sub code No. 13, which is less than the actual

remaining funds.

Response of the Ministry of Finance

We have discussed all audit findings with the MoF and as far as they could provide us enough

supporting documents, we have corrected our reports. On the findings in which they did not

agree, they could not provide acceptable reasons. Otherwise; they agreed with the rest of our

findings.


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Chapter One: General

The Qatia financial statements for the 1390 has been audited based on Presidential order No.

8008 dated 16 Hoot 1390 (6th March 2012) and audit plan of Supreme Audit Office of

Afghanistan.

Definition of Qatia Statements

Qatia financial statements are the complete records of annual expenditure of the government

budgetary ministries / departments in comparison to their approved budget. The Qatia

financial statements also reflect the prior period adjustments and subsequent period

(advance) payments. It also contains a complete record of government realized as well as

collected revenues, as compared to the annual estimated revenue in the budget.

Importance of Qatia Statements

Qatia financial Statements provide information to the MoF and other concerned authorities

regarding the budgetary performance, shortages and excesses, during the last fiscal year. It

helps MoF and the National Assembly in preparation and approving of budget for the

subsequent year wisely. In the absence of such information, the budget will be prepared

inappropriately and the budgetary offices will face a lot of challenges in budgetary

performance.

Government prepares its budget and Qatia in terms of Operating and Development

expenditure and Revenue receipts. Operating expenditures relate to current year expenditure

on operations, which include wages and salaries, use of goods and service, interest payment

and repayment of loans, subsidies, grants and social benefits and acquisition of assets.

Development expenditures are mainly expenditures related to use of goods and services

including equipments and acquisition of assets, building and structures, etc.

Government manages the expenditure of the ministries and departments and Mustofiats as

well as other entities through a centralized treasury function, called “Treasury Single

Account” (TSA). Under this arrangement, individual ministries and departments and

Mustofiats as well as other entities do not control their own bank accounts and have no

independent cash balances. All government money is managed through the TSA for Operating

budget and expenditure. All receipts, including foreign aid, and payments for operating

budget are routed and managed through the TSA. Payments are processed as per the specified

Form M-16 along with relevant supporting documents. MoF, on the basis of Form M-16,

makes entry in the Afghanistan Financial Management Information System (AFMIS) with

regard to expenditure.

For the purpose of Development budget, which is implemented on the basis of donor’s grants

and commitments, each project works as a fund and carries its balances till its completion.

Government follows the practice of rolling budget for Development budget and monies


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remaining out of the last year appropriations can be, with due approval, rolled over to the

next year budget.

Government meets a part of its operating budget from its tax, non-tax and miscellaneous

revenues and remaining from donor’s funds/grants. A small portion of amount from the

operating budget is transferred for development budget also. However, majority of the

development budget is based on donor’s fund as grants or combined with loan. Though a large

part of the donor’s funds are routed through the budget, still a substantial share of the donor’s

financial assistance is not channeled through the government account, hence does not form

part of the Qatia, e.g., the external budget.

In order to have a clear picture from estimated and earned revenues and the status of

expenditure during the fiscal year and to prevent the risk of non-implementation of budget,

MoF has legal responsibility to prepare Qatia financial Statements of the government at the

end of each fiscal year and submit it to the National Assembly.

Responsibilities of Budgetary Units (Ministries/Departments, Agencies)

As per PFEM law and accounting manual, all budgetary Units (Ministries/departments,

agencies) are required to prepare their operating and development Qatia financial Statements

in M-91 Form that show their actual annual budget, adjustment during the year, allocation

received, actual expenditure and the remaining as well as central and provincial revenue

reports (M29 and M27 Forms), considering the revenue estimated, revenue received and the

remaining, and submitted to the MoF.

Responsibilities of Ministry of Finance (MoF)

As per Article 59 of the PFEM law, MoF is responsible to prepare Qatia financial statements

based on Qatia statements of budgetary units and submit it to the Supreme Audit Office for

audit.

Responsibilities of Supreme Audit Office (SAO)

As per Article 98 of the Constitution, Article 11, Para 1 of the Audit Law and Article 59 of the

PFEM Law, the SAO is required to audit the Annual Qatia & submit the report to His

Excellency, the President of the Islamic Republic of Afghanistan and Wolsi Jerga.

Audit Scope

We have audited the Qatia financial Statements of budgetary units and consolidated Qatia

financial Statements of the government. During this audit, we have reviewed the actual annual

approved budget, financial transactions, bank statements and the supporting documents

provided to the audit team. In addition, we have also audited a number of M-16 Forms related

to the expenditure in the Ministry of Education, Ministry of Higher Education, Ministry of

Public Health and Kabul Municipality.

We have not conducted any physical verification of the asset during this audit.


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As required under PFEM law, all funds, including donor’s assistance for operating budget and

development activities, are channeled through the core budget and are managed through the

government’s budget and accounting system. However, external budget, which constitutes a

substantial share of the donor’s financial assistance, is not channeled through the TSA.

Though the Budget Committee has the final say in determining the allocations for the budget,

there is no standard framework for allocation of the external budget resources between the

sectors and the ministries, as they are not controlled by the government. In the absence of any

accounts for the external budget, it is not possible for the SAO to give any audit opinion on

external budget. No details /disclosures regarding external budget are available as notes to

the Qatia financial statements.

Supporting Documents

Any documents that support audit findings are called supporting documents. During the audit

of Qatia financial statements, we have reviewed those documents from which Qatia financial

statements were prepared. These documents include the documents of National Budget, M-27

and M-29 Form (Provincial and Central Revenue Reports), M-22 Forms (Provincial

Expenditure Reports), T-8 Forms (Payment Reports of Mustofiats and Agencies of DAB in

provinces), Payments Reports of General Dept of Treasury and Bank Statements of DAB, B-23

& B-27 Forms (budget adjustments and allocations), Expenditure Qatia of budgetary unites in

AFMIS systems and other relevant documents that can support our findings.

Transparency

Transparency is a main principle in accounting transactions. The systematic, regular, accurate

and timely bases of transactions, submission of accounting reports on timely bases to the

relevant departments, reflection of all accounting transactions in the reports, working of

internal control systems efficiently, arranging accounting records in the systems and files and

existence of inventory are the factors that help in developing transparency. Wrong entries,

non-compliance of figures (words and numbers), entry of different figures (Afghani and

foreign currency) in accounting forms and AFMIS systems and Qatia financial statements,

improper arrangements of documents, lack of documents or placing copies of documents

rather than original copies in records, deletion and omission, using of whitener for changes

and calculation with pencils, etc., negatively affect transparency of Qatia financial statements.

Audit Methodology

SAO conducts this audit in pursuance to the auditing principles and standards produced by

International Organization of Supreme Audit Institutions (INTOSAI). Those standards require

that audit is planned and performed to obtain reasonable assurance whether the accounts are

free of material misstatements and to obtain assurance that the statements fairly present the

financial affairs of the Government. The audit includes examining on a test basis, evidence

supporting the amounts and disclosures in the accounts and assessing the accounting

principles used and significant estimates made, as well as evaluating the overall presentation

of accounts to provide to audit a reasonable basis for audit opinion.


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Chapter Two: An overview of Government Finances 1390

The Qatia statements 1390 present annual expenditure of the government budgetary

ministries / departments both for Operating and Development budget as well as revenue

estimated, to be realized and collected in 1390. Government finances its activities, operating

and development, from domestic tax and non-tax revenues and donor’s assistance as well as

loans, as relevant. This chapter presents an overview of the government finances including

sources and usages of money specifically relating to 1390 with comparison for previous years.

1. Summary of Expenditure and Receipts

Government’s expenditure through operating and development budgets has shown increasing

trends. Total operating and developmental budget expenditure in 1390 has grown to 23% of

the GDP (at nominal prices of GDP as per IMF data) compared with 21% in 1388 and 1389. In

1390, government spent Afs 199,181,991,505 through operating and development budgets,

which shows an increase of 29.5% over the total expenditure of Afs 153,867,495,211 in 1389.

While operating expenditure increased by 35% in 1390, increase in development expenditure

was 15% in 1390. The following table and graph provide details and trends of operating and

development expenditure for the last three years.

Table 2.1: Total expenditure by the Government for last 3 years (Afs)

1388 1389 1390

Operating 87,313,084,854 110,485,630,266 149,385,421,841

Development 43,996,040,138 43,381,864,945 49,796,569,664

Total 131,309,124,992 153,867,495,211 199,181,991,505

Figure 2.1: Trend of Expenditure by Government (Afs)

0

50,000

100,000

150,000

200,000

250,000

1388 1389 1390

Mill

ions

Development

Operating

Total


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Though there is an increasing trend in overall expenditure by the government, there is a

decline in the share of the development expenditure vis-à-vis, the operating expenditure. For

example, the share of development expenditure in the total expenditure has come down from

33.5% in 1389 to 25% in 1390, as depicted in the graph below:

Figure 2.2: Share of operating and development expenditures

in total expenditure (as %)

0

20

40

60

80

100

120

1388 1389 1390

Development

Operating

The reason for the decrease in the share of development expenditure vis-à-vis operating

expenditure is attributable to less utilization of development appropriations by the ministries

and departments, uncertainty in commitment of funds and less rigourous budget estimates;

most importantly by those agencies which have the larger share. While 95.5% of the

operating budget appropriations approved by the National Assembly has been utilized by the

government in 1390, only 49.5% of the development budget appropriations has been spent;

leaving Afs 50,901,939,028 of development appropriations as unspent/unallocated. Share of

Ministries of Rural Rehabilitation and Development (MRRD) and Public Works alone in the

unspent/unallocated development appropriations is 34.35% and if the Ministries of Water &

Energy and Education are also added, the share of these four ministries in the

unspent/unallocated appropriation is 56.30%. Ministries of Communication, Finance, Higher

Education, Transport and Aviation, Urban Development and Directorate for Local Governance

and Brishna Industry also have substantial unspent/unallocated development appropriations

to their share. In total, eleven (11) agencies have nearly 73% of unspent/unallocated

appropriations of the development budget. Besides, Afghanistan Private Investment Support

Agency (AISA) and Ministry of Commerce have utilized only 2.5% and 17.5% of the

development budget respectively. Lack of utilization of the development budget by the

ministries / agencies mostly relating to infrastructure and natural resources sector, rural

development and economic governance does not promise well for the pace of overall


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development, as lack of utilization equals to lack of achievement of the set physical targets

and inadequate performance in the priority areas. Government may need to enhance pace of

implementation of projects and programmes without cost and time overrun by optimal

utilization of budget appropriations.

For financing its operating expenditure, Government receives revenues from both domestic

sources and foreign aid/grants from donors. Development budget is implemented mainly on

the basis of donor’s grants and a very small portion by loan.

In 1390, Government received a total of Afs 159,805,464,488; Afs 99,396,358,344 from

domestic sources and Afs 60,409,106,144 as donor’s fund for its operating activities. The

domestic revenue collection of Afs 99,396,358,344 as percentage of the operating expenditure

of 149,386,421,841 is about 66.5%. However, domestic revenue collection in 1390 as

percentage of the operating expenditure has shown declining trend compared with previous

years, as it was about 73% in both 1388 and 1389.

Table 2.2: Domestic revenue collection as percentage of operating expenditure (Afs)

1388 1389 1390

Operating Expenditure 87,313,084,854 110,485,630,266 149,386,421,841

Domestic Revenue 63,830,465,000 80,477,019,089 99,396,358,344 Domestic Revenue collection as % of Operating Expenditure

73.11% 72.84% 66.54%

Figure 2.3: Growing gap between operating expenditure and domestic revenue

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

1388 1389 1390

Mill

ion

s

Operating Expenditure

Domestic Revenue

To fully fund the operating budget from domestic revenues and exclude any dependence on

donor’s fund is the fiscal sustainability objective of the government. However, increase in


15 | P a g e

operating expenditure over the years seems to have countered the effort of the Government in

this direction and revenue from domestic sources could fund only 66.5% of the operating

expenditure in 1390. Though there is increase in revenue collection from both tax and non-tax

domestic sources in 1390, however, the rate of their growth in 1390 compared with last year

is lower. For example, tax revenue and custom duties & fees in 1390 grew by 16.2% and

10.25% respectively, while the rates in 1389 were 29.30% and 27.10% respectively. Growth

in the non-tax revenue in 1389 was 13.9% and in 1390 it was 76.2%. Further, operating

expenditure in 1390 was about 17.3% of the GDP (at nominal price), revenues from domestic

sources was only 11.5% of the GDP. The increase in operating expenditure along with

growing gap against domestic revenue poses challenge to the possibility of fiscal self-

sufficient and sustainable operating budget in near future.

For the Developmental expenditure in 1390, the Government utilized Afs 35,086,319,592

from Grants, Afs 1,650,870,124 from loans, Afs 41,539,854 from Miscellaneous receipts and

rest from treasury balance. A detailed analysis of source wise revenue and distribution of

expenditure is given below.

2. Sources of financing the operating and development budgets

In 1390, for financing its operating activities, the Government received Afs 159,805,464,488

from domestic sources as well as donor’s grants. Afs 99,396,358,344 or 62% of the total

revenue was received from the domestic sources and Afs 60,409,106,144 or 38% from

donor’s grants. The main sources for the domestic revenue are (i) Tax revenue, (ii) Custom

duties and fees, (iii) Non-tax revenues, (iv) Misc. revenues, (v) Sale of non-current assets, and

(vi) Social contributions. Component-wise break up of operating revenue is as follows:

Tax Revenue28%Custom duties &

fees19%

Non-tax Revene12.7%

Misc. Revenue0.2%

Sale of non-current assets

0.04%

Social contributions

2% Grants38%

Figure 2.4: Sources of Operating Revenue (%)


16 | P a g e

A comparison of last three years revenue receipts suggests an increasing trend of revenue

inflow, both from domestic sources and donor’s grants. However, the share of donor’s grants

in the total operating revenue, which was 34% in 1388 went up to 40% in 1389 and has

marginally declined in 1390 to 38% over the last year, but remains higher than that in 1388.

The following table gives details of operating revenue for the last three years.

Tax

Revenue

Custom

duties &

fees

Non-tax

Revene

Misc.

Revenue

Sale of non-

current

assets

Social

contribu-

tions

Grants Total

1390 45226.8 30546.44 20257.6 321.21 58.96 2985.39 60409.10 159805.45

1389 38924.6 27704.57 11495.5 436.68 107.57 1808.14 54465.77 134942.78

1388 30104.8 21796.93 10091.1 534.66 215.12 1087.84 32767.68 96598.13

Table 2.3: Receipts during last 3 years (Afs million)

For the execution of the development budget in 1390, Government utilized grants from

donors, part of the treasury balance and availed loans. Details of development budget

financing sources are as follows:

Table 2.4: Sources of funding the Development budget 1390

Description Amt. (Afs)

Donor's grants for development budget 35,086,319,592

Loans 1,650,870,124

Miscellaneous receipts 41,539,854

Transfer from treasury balance 13,289,153,609

Transfer from operating revenue (Govt. A/c) 21,201,753.00

Total 50,089,084,932


17 | P a g e

Grants70%

Loans3.3%

Misc. receipts0.1%

Transferfrom Treasury

balance26.5%

Transf from Govt A/c0.04%

Figure 2.5: Funding Development Budget 1390

3. Usage of funds for operating and development activities: distribution by

economic categories

Through the operating and development budget, government seeks to achieve various current

and long term objectives. As per the economic categories, government spends on five

segments, namely wages and salaries, goods and services, interest and loan repayment,

subsides, grants and social benefits and acquisition of assets. Distribution of the expenditure

from operating and development budgets suggests that in 1390 government spent 56% on

wages and salaries (13% of GDP), 23.5% goods and services (5.5% of GDP), 0.1% on interest

and loan repayment (0.02% of GDP), 4.5% on subsides, grants and social benefits (1% of GDP)

and 15.9% on acquisition of assets (3.5% of GDP). Payment of interest and repayment of loan

constitutes the marginal segment, which indicates less liability of loans on the government.

The loan amount of Afs 1,650,870,124 taken in 1390 is for development activity and is only

from external sources. It constitutes only 1.66% of the domestic revenue in 1390 and 0.19%

of the GDP. Government does borrow from domestic sources.

Codes Objects of Expenditure Operating Development Total % share

21 Wages & Salaries 111,716,742,459 0 111,716,742,459 56.09

22 Use of Goods & Services 25,864,800,873 20,967,196,924 46,831,997,797 23.51

23 Interess & Repayment of Loans 176,106,159 0 176,106,159 0.09

24 Subsidies, Grants & Social Benefits 8,936,033,175 0 8,936,033,175 4.49

25 Acqusition of Assets 2,691,739,175 28,829,372,740 31,521,111,915 15.83

149,385,421,841 49,796,569,664 199,181,991,505 100.00TOTAL

Table 2.5: 1390 Operating & Development Expenditure by Economic Categories (Afs)

Out of the total operating expenditure of Afs 149,385,421,841 in 1390, share of wages and

salaries is 75%, followed by 17% on use of goods and services and 6% on subsidies, grants


18 | P a g e

and social benefits. The following graph provides percentage distribution of operating

expenditure in 1390 as per economic categories.

74.78

17.31

0.12 5.981.80

Figure 2.6: 1390 Operating Expenditure (%)

Wages & Salaries

Use of Goods & Services

Interess & Repayment of Loans

Subsidies, Grants & Social Benefits

Acqusition of Assets

The pattern of operating expenditure in 1390 with predominance of expenditure being

towards wages and salaries followed by use of goods and services and a small portion for

subsidies, grants and social benefits is found in previous years also. It is, however, observed

that between salaries and wages and use of goods and services, the share of wages and

salaries is increasing and the share of use of goods and services is declining over the last five

years.

Codes Objects of Expenditure 1390 1389 1388 1387 1386

21 Wages & Salaries 111,716,742,459 86,474,028,151 64,256,207,046 47,830,832,541 33,564,478,145

22 Use of Goods & Services 25,864,800,873 17,157,832,920 16,858,608,847 15,966,624,845 12,669,778,684

23Interest & repayment of

Loans 176,106,159 112,351,075 174,176,765 155,119,896 248,102,364

24Subsidies, Grants & Social

Benefits 8,936,033,175 5,151,557,536 4,690,795,568 3,381,923,904 2,829,466,726

25 Acqusition of Assets 2,691,739,175 1,589,860,584 1,333,296,628 1,765,315,205 1,414,953,104

149,385,421,841 110,485,630,266 87,313,084,854 69,099,816,391 50,726,779,023

Table 2.6: Operating Expenditure by Economic Categories (Afs)

TOTAL


19 | P a g e

Figure 2.7: Operating expenditure by economic categories for 5 years

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

45.00

50.00

55.00

60.00

65.00

70.00

75.00

80.00

1390 1389 1388 1387 1386

Wages & Salaries





Out of the total development budget expenditure of Afs 49,796,569,664 in 1390, only two

economic categories, namely use of goods and services and acquisition of assets share the

entire expenditure. The following graph provides percentage distribution of development

expenditure in 1390 as per economic categories.

Use of Goods& Services

42.11 %

Acquistion of Assets

57.89 %

Figure 2.8: 1390 Development Expenditure

The pattern of development expenditure in 1390 with predominance of expenditure on

acquisition of assets and use of goods and services is found in previous years also. It is,

however, observed that between the two economic categories, the share of acquisition of


20 | P a g e

asset is declining while the share of use of goods and services is increasing over the last three

years. Unlike the previous years, in 1390, there is no expenditure from the development

budget on subsidies, grants and social benefits. However, in the operating budget, the

expenditure on subsidies, grants and social benefits in 1390 increased by 73.5% compared

with 10% in 1389.

Codes Objects of Expenditure 1390 1389 1388

21 Wages & Salaries - - -

22 Use of Goods & Services 20,967,196,924 15,695,646,080 15,070,957,811

23 Interest & Repayment of Loans - - -

24 Subsidies, Grants & Social Benefits - 416,326,169 207,574,421

25 Acqusition of Assets 28,829,372,740 27,269,892,696 28,712,507,906

49,796,569,664 43,381,864,945 43,991,040,138TOTAL

Table 2.7: Development Expenditure by Economic Categories (Afs)

Figure 2.9: Development expenditure by economic categories for 3 years

0.005.00

10.0015.0020.0025.0030.0035.0040.0045.0050.0055.0060.0065.0070.0075.0080.00

1390 1389 1388

Wages & Salaries





4. Usage of funds for operating and development activities: distribution by sectors

of the economy

Government through the operating and development budgets seeks to achieve various

sectoral targets and national priority programmes. Combined operating and development

expenditure of about Afs 199,182 million in 1390 was spread to the eight sectors, namely i)

Security, ii) Governance and Rule of Law, iii) Infrastructure and Natural Resources, iv)

Education, v) Health, vi) Agriculture and Rural Development, vii) Social Protection and viii)


21 | P a g e

Economic Governance. Distribution of the expenditure from operating and development

budgets suggests that in 1390 government spent 43% on security (about 10% of the GDP),

followed by 16% on education (about 3.6% of the GDP), 13% on infrastructure and natural

resources (about 3% of the GDP), 7% on agriculture and rural development (about 1.7% of

the GDP), 6.4% on general governance (about 1.5% of the GDP), 5.8% on economic

governance (about 1.3% of the GDP), 5% on social protection (about 1.1% of the GDP) and

4% on health (about 0.8% of the GDP).

Operating Development Total % share

Security 85499.41 567.00 86066.41 43.21

Governance and Rule of Law 11122.30 1572.84 12695.14 6.37

Infrastructure & Natural Res. 4961.86 20917.83 25879.69 12.99

Education 26066.86 5541.10 31607.96 15.87

Health 2179.80 4852.70 7032.50 3.53

Agriculture & Rural Dev. 2540.60 12063.80 14604.40 7.33

Social Protection 9175.94 599.10 9775.04 4.91

Economic Governance 7838.53 3682.67 11521.20 5.78

Total 149385.30 49797.04 199182.34

Table 2.8: Sector-wise Operating and Development expenditure 1390 (Afs mill)

However, the major portion of the operating expenditure in 1390, 57% was spent on security

sector followed by 17.5% on education and 7.5%, 6% and 5% on governance, social

protection and economic governance respectively. The rest three sectors shared only 7% of

the operating expenditure.

Figure 2.10: Distribution of operating expenditure by sectors in 1390

57.2% (57.6%)

7.4% (6.7%)

3.3% (2.5%)

17.4%(16.7%)

1.5%(2%)

1.7% (1%)

6.1%(10.8%)

5.2%(3%)

Security

Governance

Infrastructure and Natural Resources

Education

Health Sector

Agriculture and Rural Development

Social Protection

Economic Governance

(Figures in bracket reflect initial budget intentions of percentage share)


22 | P a g e

In 1390, while the emphasis of operating expenditure was on security and education, which

shared about 75% of the total operating expenditure, major focus of the development

expenditure were infrastructure and agriculture and rural development, which shared 66% of

the total development expenditure. Education, health and economic governance has share of

11%, 10% and 7.5% of the development expenditure. The rest three sectors got 5.5%.

Figure 2.11: Distribution of development expenditure by sectors in 1390

1.1% (1%)

3.2% (4.2%)

42% (36%)

11.1%14.3%)

9.7%(10.2%)

24.2%(26%)

1.2% (1.1%)

7.4%(6.7%)

Security

Governance

Infrastructure and Natural Resources

Education

Health Sector

Agriculture and Rural Development

Social Protection

Economic Governance

(Figures in bracket reflect initial budget intentions of percentage share)

The pattern of expenditure in 1390 with focus of operating expenditure on security and education and

development expenditure on infrastructure & natural resources and agriculture and rural

development is found to be a generally trend in previous years also as depicted in the figures below.

Figure 2.12: Operating expenditure by sectors for last 5 years

0

10000

20000

30000

40000

50000

60000

70000

80000

90000

1390 Operating

1389 Operating

1388 Operating

1387 Operating

1386 Operating


23 | P a g e

Figure 2.13: Development expenditure by sectors for last 3 years

0

5000

10000

15000

20000

25000

1390

1389

1388


24 | P a g e

Chapter Three: Audit Process and General Information on Budget

A. Opening meeting and introduction

The Supreme Audit Office of Afghanistan, as per Article 98 of the Constitution, Article 11, para

1 of the Audit Law and Article 59 of the PFEM Law has assigned an Audit Commission, Chaired

by Sayed Mohammad Mehdi Hussaini, Deputy AG (Operational) to audit the Qatia financial

statements 1390. The Commission met Excellency Hazart Omer Zakhilwal, Finance Minister

on 31st Jawaza 1391 (20th June 2012). In the meeting, a number of important issues were

discussed, which included importance of Qatia audit, financial position of the country during

the previous year, role of the budgetary and financial decision-makers, strengthening

transparency, deficiencies and shortages pointed out in 1389 audit report and the limitation

of short statutory time-frame under which Qatia audit needed to be finished. The Minister

was requested to extend help to the audit commission by making the Qatia financial

statements 1390 and the supporting documents available at the earliest. It was also requested

that the concerned officials dealing with the Qatia financial statements 1390 could be asked to

provide the documents and information needed during the audit in time. At the end of the

meeting, where Janab M. Alhaj Mohammad Aqa, DG of Treasury Dept was also present,

Excellency Hazart Omer Zakhilwal promised to help the Audit Commission.

B. The process of submission of Qatia financial statements 1390 for audit

The audit commission met Administrative Deputy, DG of Treasury and Admin Director in the

Ministry of Finance on 3rd Saratan 1391 (23rd June 2012) separately. During these meetings, it

was learnt that the Qatia financial statements 1390 were yet not ready for audit.

Subsequently, the MoF submitted the Expenditure Qatia for the operating budget 1390 to the

commission on 10th Saratan 1391 (30th June 2012). Likewise, the Expenditure Qatia for the

development budget 1390 and Revenue Qatia 1390 were submitted to the audit commission

only by the middle of Asad 1391 (July 2012). A brief on the date of submission of Qatia

financial statements to the audit commission during the last 5 years is as follows:

Years

Dates of submission of the Qatia financial statements for audit Operational Budget

Qatia Development Budget Qatia Revenue Qatia

1386 11 Saratan 1387 (2nd July 2007)

11 Saratan 1387 (2nd July 2007)

11 Saratan 1387 (2nd July 2007)

1387 10 Saratan 1388 (30th June 2008)

15 Saratan 1388 (5th July 2008)

19 Asad 1388 (9th August 2008)

1388 6 Saratan 1389 (27 June 2009)

26 Saratan 1389 (17th July 2009)

31 Asad 1389 (22nd August 2009)

1389 6 Saratan 1390 (27th June 2010)

29 Saratan 1390 20th July 2010)

26 Saratan 1390 17th July 2010)

1390 10 Saratan 1391 (27th June 2011)

11 Asad 1390 (2 August 2011)

16 Asad 1391 (7th August 2011)


25 | P a g e

As per Article 98 of the Constitution and Article 55 and 59 of the PFEM Law, Qatia financial

statements shall be prepared and audited during the first six months of the year. Hence, MoF

has the responsibility to prepare and submit Qatia financial statements for audit at the

beginning of Saratan. Likewise, the SAO is responsible to audit and submit the audit report to

Excellency President Office and National Assembly before the end of second quarter of the

year.

Despite recommendation of the audit last year for timely submission of the Qatia financial

statements to the audit commission, this year also, submission was delayed and the

statements were submitted at different intervals. The Qatia financial statements 1390 for

Operating Qatia, Development Qatia and Revenue Qatia were delayed by 10 days, 42 days and

47 days respectively. In comparison with 1389, Qatia financial statements 1390 for the three

statements were delayed by 4, 13 and 21 days respectively.

The MoF justified the delays on account of non-submission of Qatia financial statements by

the budgetary units and Mustofiats on the dateline. The delays in submission of Qatia financial

statements, regardless of the reasons given by the MoF, negatively affect the completion of the

audit within the date provided in Afghanistan Constitution and PFEM law, which is the end of

Sunbola and submission of audit report to the stakeholders.

While there was a considerable delay in submission of Qatia financial statements 1390 by the

MoF and the data required for the audit, the audit commission completed this audit in the

dateline.

1390 National Budget and the Financing Sources

A. 1390 National Budget

The National Budget (Operating and Development Budget) for the year 1390 was approved

through Act No. 1 on 12 Sawar 1390 (2nd April 2011) and was enacted through Presidential

order No. 12 dated 25 Sawar 1390 (15th May 2011). Further information is given in the table

below:

(Amt in Afs)

No. Budget Details Amounts

Total

% of actual and

contingency fund to budget

Total

1. Operating Budget

Actual Budget 717,557,531,000 770,527,771,000

90.08% 100% Contingency

Budget 73,173,157,000 9.92%

2. Development Budget

Actual Budget 57570159975000 53507355005000

96.5% 100% Contingency

Budget 2,733,977,000 3.5%

Total budget 1390 118,047,422,777 100%


26 | P a g e

B. Financing Sources

Information on financing sources of the National Budget (Operating and Development

Budget) 1390 is given below:

(Amt in Afs)

No Budget Actual Approved

Budget

Financing Sources Total Financed

Budget

Balance Domestic Revenue

Grants Loans

1 Operating Budget

770,527,771,000 93,077,719,000 77,570,127,000 - 627,051,661,77

7 -

2 Development Budget

53,073,500,000 72,711,731,200 73,199,775,700 0,770,117,77

7 06,652,,11,577 (5,16,,,75077)

Total 223,590,971,000 17,773,935,200 727,711,359,700 0,770,117,77

7 556,,15,762,57

7 (5,16,,,75,077

)

As depicted in the table above, the balance for operating budget during 1390 is nil, but there

is a deficit of Afs 2,918,803,700 in the development budget. This constitutes 1.3% of total

development budget, which has been included in transferred and new projects.

There were certain changes in 1390 development budget as per the documents provided by

the MoF, the actual development expenditure in 1389 and the actual remaining fund to be

transferred in 1390. These changes has been considered as budget supplement and

implemented accordingly. Detailed information on the development budget supplement in

1390 is given in the table below:

Details Amounts Total Development Budget in 1389 after adjustment during the year

777,191,571,950

Total Expenditure in 1389 31,101,909,170

The Balance of the project to be forwarded in 1390

84,848,282,817

Total of completed and terminated projects

7,500,151,710

Funds to be forwarded in 1390 81,248,840,227

Funds of completed projects, which has been forwarded, shall be deducted from 1390 budget

25,011,720

Total Development Budget in 1390 272,228,804,827

As per the table above, the development budget has increased for an amount of Afs

101,196,638,410 in 1390, which constitute 37% of the total development budget.

These amounts recorded in the first three lines of the above table do not match with the Qatia

financial statements of 1389. More information is available in the report.


27 | P a g e

Financing Sources of Development Budget in 1390 as per Actual Budget Supplement

No Financing Source Total Financing

Total Development

Budget in 1390

Deficit in 1390 Development

Budget Details

Domestic Revenue

Grants & Loans

1 Domestic revenue as per budget in 1390

1,10,,101,557 -

0908550,980908

676,611,15,,067

4,04240,2102,8

2 Revenue from Aynak copper mine

5,016,777,777 -

3 Funds forwarded from last year domestic revenue

166,777,777 -

4 Funds accumulated in government account in the last years

6,750,777,777 -

5 The balance of optional account at the beginning of the year

055,777,777 -

6 Foreign grants - 622,677,777

7 Grants -11,,07,106,01

7

8 Loans - 0,,55,777,777

Total 420,810,290,,8 120021012401,8 0908550,980908 676,611,15,,067 4,04240,2102,8

As per the table above, there is a deficit in development budget for an amount of Afs

12,141,247,430, which constitutes 12% of all development budget.

In addition, Afs 84,015,198,000 from domestic revenue has been applied in the operating

budget and Afs 14,207,649,220 in development budget, total 98,222,847,220 has been

financed from domestic revenue. These amounts constitute 56% and 14% of total operating

and development budget respectively. As such, a total of 42.77% of the National Budget has

been financed through domestic revenue. In comparison to 1389 budget, this shows a

decrease of 4% in operating budget and an increase of 378% in development budget. In 1390,

domestic revenue of Afs 93,663,000,000 had been estimated to be collected from domestic

revenue sources, considering this amount there is deficit for an amount of Afs 4,559,847,220

in national budget.


28 | P a g e

14%

69%

5% 12%

Financing of Development Budget in 1390

Domestic Revenue Grants

Loans Deficit in Development Budget

56%

44%

Financing of Operating Budget in 1390

Domestic Revenue Grants


29 | P a g e

Chapter Four: Description of the Results of Qatia Audit 1390

Operating Qatia Statements

A. Actual Approved Budget (Amt of Afs)

Details Amounts Percentage Actual budget 652,006,005,777 90.08% Contingency budget 60,120,501,777 9.92% Total approved budget

627,051,661,777 100%

B. Reflection of Budget in Qatia Statements

The table below shows the actual approved budget, adjustments during the year, expenditure and the remaining:

(Amt of Afs)

Details Amounts Actual approved operational budget 652,006,005,277

Decrease outside budgetary units 5,625,251,175

Total 4,,,,40,,8,,591

Increase outside budgetary units 5,725,251,175

Balance after adjustments 4,5,,14,12,,588

Increase from reserve code(contingency)

61,,0,,566,066

Increase in budget supplement 5,,67,161,66

Total of Budget 45,,,,8,014,508

Total of Expenditure 601,5,2,056,,06

Balance (unspent ,,915,229,1,9

Principally, the amount of adjustments due to increase or decrease outside budgetary unites

should be balanced in the Qatia statements. However, in the Qatia statements 1390, while Afs

2,153,536,903 has been recorded as decrease outside the agency, Afs 2,053,536,903 only have

been recorded as increase outside the agency, leaving Afs 1,000,000 as unexplained. Further,

as per the request of MoF and the Presidential order No. 8135 dated 20th Hoot 1390 (10th

March 2012) and B-22 Form (undated), Afs 200 million has been deducted from Code No. 22

of the Ministry of Health. Out of that, Afs 1 million has been added to the code No. 900004

(balance of currency) and the rest to the seven budgetary units. Due to these adjustments,

increase and decrease outside Budgetary Units has become imbalance. Further, it has also

resulted in increase in the contingency budget for Afs 1 million. However, no accounting error

was found.


30 | P a g e

In 1390, against total operating budget appropriations of Afs 156,360,871,580, an

expenditure of Afs 149,385,421,841 has been reported. This constitutes 95.5% utilization

against the total appropriations, leaving Afs 6,975,449,739 or 4.5% unutilized. Lowest

utilization of operating budget appropriation is 87% in health sector followed by

infrastructure and natural resources sector at 93% and highest utilization is reported in

education sector at 99%. Sector wise non-utilization of operating budget appropriations in

1390 is as follows:

Sectors AppropriationsActual

expenditure

% non-

utilization

Security 90,622,230,381 85,499,564,714 5.65

Governance 11,496,854,237 11,122,272,214 3.26

Infrastructure & Natural Resources 5,334,815,807 4,961,789,994 6.99

Education 26,359,837,770 26,066,939,674 1.11

Health 2,512,907,371 2,179,766,973 13.26

Agriculture & Rural Development 2,642,874,679 2,540,619,591 3.87

Social Protection 9,300,667,702 9,176,014,000 1.34

Economic Governance 8,090,683,633 7,838,454,781 3.12

Total 156,360,871,580 149,385,421,841 4.46

Operating Budget appropriations and actual expenditure 1390

As per the international best practices, an explanation of material differences between budget

and actual amounts should be provided in the financial statements. However, Qatia

statements do not provide any explanations for the significant variations in the actual

amounts and the appropriation amounts. In the absence of any such explanations, it is not

possible to comment on the variations and lack of utilization. The variations include both

allotted unspent amount of Afs 3,240,140,420 and unallotted appropriations of Afs

3,735,309,319. Utilization of operating appropriations for last five years has always been

below 97%.

90.00

91.00

92.00

93.00

94.00

95.00

96.00

97.00

1386 1387 1388 1389 1390

Utilization of Operating appropriations (%)

1386

1387

1388

1389

1390


31 | P a g e

It is therefore recommended that explanation of material differences between appropriations

and actual amounts may be presented by the government along with Qatia Statements.

As per Qatia financial statements, Afs 6,975,449,739 of operating budget has been left

unutilized. Out of this amount, Afs 4,515,973,838, which constitute 65% of unutilized amount,

belong to the Ministry of National Defence and the rest Afs 2,459,475,901, which constitute

35% of the unutilized amount, related to other budgetary units.

However, as per the National Budget, unutilized amount comes to Afs 1,340,697,559 only,

which is less by Afs 5,634,752,180 compared to Qatia statements. In fact, an amount of Afs

3,810,916,669 is included in the budget supplement and the remaining amount of Afs

1,823,835,484 is related to the adjustment for the differences from reserve codes.

An amount of Afs 14,954,376,000 was allotted as reserve and contingency fund under

operating budget at the beginning of the year. However, as per the Qatia Statements, Afs

16,878,211,411 has been shown under the reserve and contingency codes. As per the

Presidential order No. 65 dated 30th Mizan 1390 (21st Oct 2012) and B-23 Form No. 21919

dated 1st Aqrab (22nd Oct 2012), US $ 51 million (equal to Afs 2,397,000,000) has been added

to code No.220 of the Ministry of Finance for the compensation loss of Da Afghanistan Bank.

With adjustment of an amount of 14,481,211,411under contingency fund from some other

codes, the total amount of reserve code comes to Afs 16,878,211,411.

Operating Expenditure by Codes in 1390

Code Total of budget Budget Total Total of Remained % of % of each

after adjustment Supplement Expenditure Expenditure code in total Exp

21 114.051.726.626 2.079.800.019 116.131.526.645 111.716.742.459 4.414.784.186 96.19 75

22 26.322.363.932 1.453.331.928 27.775.695.860 25.864.800.873 1.910.894.988 93.12 17

23 176.106.159 - 176.106.159 176.106.159 - 100 0.1

24 9.118.447.000 - 9.118.447.000 8.936.033.175 182.413.825 98 6

25 2.881.311.194 277.784.722 3.159.095.916 2.691.739.175 467.356.741 85.28 1.9

Total 152.549.954.911 3.810.916.669 156.360.871.580 149.385.421.841 6.975.449.740 95.53 100

As per the table above, approximately 75% of the expenditure is related to Code 21, 17% is

related to Code 22 and the remaining 8% is related to other Codes.

The entities to which most of the remaining operating budget is relate to are as follow:

No Department Total budget Total

Expenditure Remaining

% of Budget

1 Ministry of National Defense

00,110,01,,55

1 07,60,,250,076 0,262,105,,5, 67.67

2 Ministry of Communication 556,660,,07 617,125,6,1 07,616,126 60.07

3 Ministry of Public Works 5,,51,050,560 5,216,,01,757 500,20,,5,0 1.,7


32 | P a g e

4 Ministry of Counter Narcotics 607,,55,025 656,511,,2, 61,211,,12 65.17

5 National Standardization Authority

17,210,550 05,160,550 60,101,11, 51.6,

6 Disaster Management Office

,1,751,527 01,510,,05 65,01,,27, 60.50

7 Independent Election Commission

665,652,150 11,510,6,2 65,,1,,025 65.51

8 High Commission of Nuclear Energy

51,075,,16 55,,00,500 2,,52,100 61.17

9 General Directorate for Kuchies 00,015,077 51,156,101 0,255,726 67.61

10 Independent Monitoring Commission for Implementation of Constitution

2,,551,152 25,6,5,,72 1,701,657 67.5,

As per the Revenue Qatia statements for the year 1390, out of the commitment of Afs

66,710,921,300 by the donors for financing the operating budget, Afs 60,409,106,144 has

been reported as inflow and Afs 6,301,815,156 remained with the donors. As pointed out

earlier in our audit report of 1389, such practices indicate gap in budgeting vis-à-vis

realization of budget commitments.

For meeting the requirements of additional funds during the year, in addition to the original

budget, these are provided to ministries /departments from contingency budget, rather than

through budget supplement or adjustments within the budget, as the latter would be more

appropriate for financial control. Considering the economic and political situation of

Afghanistan and increase in the budget each year, we recommend preparation of the

operating budget with due care.

Comparison of actual approved budget, expenditure and remained 1384 to 1390

(Amt of Afs) Year Total budge after

adjustment during the year

Expenditure Remained % of Budget Implementation

65,1 55..76.777.777 56.101.625.506 6..56.,10..51 11.60 65,1 00.101.271.115 05.617.,,1.622 6.16,.601.10, 1... 65,. 11.,61.1.7.777 17.05..001.755 1.7,,..,7.100 15.11 65,0 0..160...6.,11 .1.711.,6..516 0.560.,11115 17.15 65,, 15.,6,.516.55, ,0.565.7,0.,20 1.171.57..5,1 11.7. 65,1 662.225.601.550 667.0,2.157.511 2.710.26,.116 11.. 6517 621.517.,06.2,7 601.5,2.056.,06 1.102.001.007 11.15

Original approved budget and expenditure through operating budget has shown increasing

trends since 1384. The budget for the year 1385 increased by 33% compared to 1384; in

1386, 22.6% compared to 1385, in 1387, 39.4% compared to 1386, in 1388, 21% compared to

1387, in 1389, 24.5% compared to 1388 and in 1390 35% compared to 1389. In 1390, it

increased by 3655 compared to 1384.


33 | P a g e

As a result of enlargement in security (Afghan National Police and Afghan National Army) and

education sectors, the budget for the year 1390 has increased considerably compared to

1389. However, as per National Budget and Qatia statements the increase in the budget is not

limited to the security and education sectors only and is seen across all sectors. Since a part of

the operating budget is financed from Grants, the Government of Afghanistan will face a very

big challenge, if the increasing trend in the budget continues.

Comparison of Operating Budget: 1389 & 1390

Sectors

1389 1390

Security 62.734.324.793 90.622.230.381 44.5

Governance,Rule of law & Human Rights 11.050.894.331 11.496.854.237 4

Infrastructure & Natural Resources 3.428.308.796 5.334.815.807 36

Education 22.874.666.578 26.359.837.770 15

Health 2,232,666,354 2,512,907,371 12.5

Agriculture & Rural Development 1.720.377.700 2.642.874.679 54

Social Protection 6.881.628.446 9.300.667.702 35

Economic governance and development

of private sector 4.630.282.229 8.090.683.633 75

Total 115.553.149.227 156.360.871.580 35

Total of Budget after adjustment % of increase in

the budget

C. Major Audit Findings from the Audit of Operating Budget

1. As per the Qatia statements 1390, Afs 3,810,916,613 was paid to five budgetary units

as budget supplement. The details are as follow:

1.1 As per the Presidential orders No. 3287 dated 3 Asad 1390 (25th July 2011) and No. 4604

dated 3 Mizan 1390 (24th Sep 2011) and Forms B-23 No. 351 dated 11 Mizan 1390 (3rd Oct

2011) and No. 258 dated 16 Asad 1390 (7th August 2011), Afs 1,620,109,839 was paid to

the Ministry of National Defense, as budget supplement from CSTC-A fund.

1.2 As per the Presidential orders No. 2647 dated 6 Saratan 1390 (27th June 2011), No. 2664

dated 7th Mizan 1390(29th Sep 2011), No. 4047 dated 28 Sunbula 1390(19 Sep 2011), No.

5708 dated 30th Aqrab 1390(21st Nov 2011) and No. 7411 dated 17th Dalwa 1390(6th Feb

2011) and Forms B-23 No. 1093 dated 1 Asad 1390 (23rd July 2011), No. 2807 dated 30

Aqrab 1390 (21st Nov 2011), No. 7411 dated 17 Dalwa 1390 (6th Feb 2011), No. 3231

dated 7th Jadi 1390 (28th Dec 2011), No. 2171 dated 27th Qaws 1390(18th Dec 2011), No.

2170 dated 27th Qaws 1390(18th Dec 2011), No. 863 dated 16th Sunbula 1390 (7th Sep

2011) and No. 1577 dated 6th Mizan 1390 (28th Sep 2011), amounts of Afs 776,878,320

from CSTC-A fund and Afs 432,910,769 from private companies, total of Afs 1,209789,089

has been paid to the Ministry of Interior as budget supplement.

1.3 As per the Presidential order No. 4048 dated 5 Sunbula 1390 (27th August 2011) and

Forms B-23 No. 1409 dated 15th Saratan (6th July 2011) and No. 1736 dated 17th Mizan

1390 (9th Oct 2011), Afs 38,361,478 has been paid by Broadcasting Board of Governors,


34 | P a g e

which is an American company, as budget supplement to the Ministry of Information and

Culture for the purpose of improving National TV programs and activities.

1.4 As per the Presidential order No. 65 dated 20th Mizan 1390(12th Oct 2011) and Form No.

B-23 No. 648 dated 27th Hoot 1390(17th March 2011) Afs 940 million has been paid to the

Ministry of Public Work as budget supplement for the construction of Hairatan – Mazar-e-

Sharif railways.

1.5 As per the Presidential orders No. 6725 dated 14th Jadi 1390 (4th Jan 2011) and Form B-23

No. 1557 dated 24th Jadi 1390 (14th Jan 2011); the Presidential order No. 3320 dated 4th

Asad 1390 (26th July 2011) and Form B-23 No. 855 dated 12th Asad 1390 (3rd August

2011) and order No. 4732 dated 9th Mizan 1390 (1st Oct 2011) and Form B-23 No. 1191

dated 16th Mizan 1390 (8th Oct 2011), Afs 2,656,207 has been paid from UNDP fund and

CGSO of Canada as budget supplement to the Ministry of Justice for paying the rent of

Taqnin (law) and human rights buildings.

The aforesaid amounts, except Afs 940 million for the construction of Hairatan – Mazar-e-

Sharif railways, have not been approved by the National Assembly. Also, these payments have

increased the budget ceiling by an amount of Afs 2,870,916,611 too.

As per the information received from the Budge Depart of the MoF, vide Article No. 23 of

the Budget Implementation Policy, the budget supplement for development and operating

budget for the year 1390 along with the letter no. BS1-20442 dated 2nd Hoot 1390 (22nd Feb

2012) has been sent to the Ministry of Parliamentarian Affairs. However, as per the Budget

Supplement Table and letter no BS1-20442, Afs 19,180,779, Afs 224,999,998 and Afs

10,145,139 have been paid as operating budget supplement to the Ministry of Information &

Culture, Ministry of National Defense and Ministry of Justice respectively. The budget

supplement for the Ministry of Interior is not included in these transactions and it does not

match with Qatia statements and reported to the National Assembly at the end of the fiscal

year.

Since the budget becomes sanctioned only after the approval of the National Assembly and

signature of the State President, all adjustments, which resulted in increasing the budget

ceilings, need to be got approved by the National Assembly in due time, or authorized as

agreed with MoF.

2. As per Act No. 10 dated 24th Mizan 1390 (16th Oct 2011) and the Presidential Order No.

65 dated 20th Mizan 1390 (12th Oct 2011), US $ 20 million (Afs 940 million) has been

approved for the construction of Hairatan-Mazar-e-Sharif railways and Afs US $ 51 million

(Afs 2,397 million) for disinvestment of Central Bank as budget supplement from the

development budget. The details are as follow:

2.1 We found that the above mentioned amounts have been paid from Operating Budget

rather than development budget, which is against the Presidential Order and National

Assembly’s approval. The Budget Depart of the MoF maintains that since it is in the

nature of operating expenditure, this has been considered in the Operating Budget in the


35 | P a g e

letter sent to the Council of Ministers and National Assembly; therefore, the amounts

have been paid form operating budget.

2.2 Out of Afs 950 million, which has been allotted for construction of Hairatan-Mazar-e-

Sharif railways, Afs 19,270,000, Afs 470,000,000 and Afs 376,000,000 (total Afs

865,270,000) have been paid to the Ministry of Public Works through Forms B-27 No.

446 dated 24th Aqrab 1390(15th Nov 2011), B-27 No. 413 dated 2nd Aqrab 1390(24th Oct

2011) and B-27 No. 637 dated 6th Hoot 1390 (25th Feb 2012) respectively. Later on Afs

950 million has been added to the budget of the Ministry of Public Work as budget

supplement through Form B-23 No. 648 dated 27th Hoot 1390 (17th March 2012).

Though there was no misuse of fund in this transaction, however, such acts shows lack of

internal control which may result in fraud if care is not taken. From our point of view, Afs

865,270,000 should have been included in the Order No. 65 dated 20th Mizan 1390 (12th Oct

2011) of the State President and withdrawn through Form B-23 rather than FormB-27.

2.3 As per Article No. 21 of PFEM law, MoF may make a loan to any administration,

enterprise or company that is provided for in an Annual Budget. Accordingly, the Treasury

Depart of the MoF was requested to make available certain information regarding loans

provided by the MoF. It was informed that MoF has not made any loan during 1390.

However, as per the information received from DAB, Afs 18,108,250,00 in 1389 and

Afs 19.500 billion in 1390 (total Afs 37,608,250,000) have been paid by DAB, as loan to Kabul

Bank. These amounts have been paid based on separate approvals of the Finance Minister,

agreement of the council of the ministers, request of DAB and approval of the State President

respectively.

As per Article 86 of Banking Law, Da Afghanistan Bank may make loan to the internal

financial entities under specific conditions for a period of not more than 3 months.

Accordingly, DAB has paid the above mentioned amount to Kabul Bank after receiving the

approvals from the appropriate authorities as loan. Afs 2,765,526,550 only of the total loan

has been received so far, though 3 months period of the loan is already over. DAB refused to

provide to audit any further information on repayment of the balance loan and maintained

that they have already submitted the information to MoF, which can be asked to give

information to audit.

We shared this issue with MoF. They pointed out that the payment has been made for the

compensation of disinvestment of DAB and is not treated as loan to DAB. Regarding Kabul

Bank loan, no further information has been provided.

3. As per Article 15, para 1 of PFEM law, the Ministry of Finance may authorize the

investment of public money in financial deposits and the liquidation of such investments in

accordance with the provisions of law.

MoF was requested to provide information about the investment of public money. They

responded that there was no investment made from public money during 1390, as the


36 | P a g e

domestic revenue did not suffice more than 60% of the operating budget. As mentioned

above, Afs 37 billion of public money has been given to Kabul Bank as loan. The authority in

the MoF, however, has orally maintained that this is not a loan to Kabul Bank and has been

paid as per the contract signed between DAB and MoF and the Ministry has committed to

compensate this payment in a period of 8 years, starting from 1390.

4. Operating Qatia 1390 statements show a total advance payment of Afs 5,978,104,653,

out of that Afs 4,612,589,459 has been reported as adjusted and Afs 1,365,515,194 of advance

payment remained unadjusted at the end of 1390. Out of the unadjusted amount, Afs

986,515,866, which constitutes 72.2% of the mentioned amount, is related to MoF and Afs

30,000,000 to Independent Board of Cricket through 3 M-16 forms and the rest to different

office. Out the money relating to the MoF, Afs 707,641,954 was transferred for opening of a

Letter of Credit (LC) for Brishna Company and Afs 188,404,159 was transferred to account of

Ghazanfar Oil and Gas Lt.

4.1 In 1389, Afs 608,636,000 and Afs 646 million were transferred to the Ghazanfar bank

account and Etimat Ltd. for LC of Brishna Company respectively. In 1390, MoF again

transferred Afs 188,404,159 to Ghazanfar account for the LC of Brishna company, while the

previous LC had not been cleared until that time.

4.2 As per the information received from General Depart dealing with unadjusted

advances of the Treasury Depart, the following amounts related to previous years, remained

unadjusted so far:

Year amounts in Afs

1381-87 791,765,614

1388 433,867,259

1389 1,456,255,073

Total 2,681,887,946

As such, Afs 2,681,887,946 has remained unadjusted during 1381 - 1389. These

practices show negligence of MoF in collecting the balances and as a result, most of the

unadjusted amounts have now become bad debts. For more information regarding

unadjusted amounts, table 1&2 below may refer.

4.3 As per Qatia statements, Afs 1,365,515,194 of advance payments remained unadjusted

as at the end of 1390 operating budget; while as per AFMIS figure Afs 1,351,570,677

remained unadjusted. Hence, the relevant codes are less by Afs 13,944,517 in the AFMIS than

in the Qatia statements. The difference between the AFMIS figure and those included in the

Qatia statements was found to be due to exclusion of amount of advances relating to

Mustofiates (M/o Finance, M/o Foreign Affairs, M/o Education, M/o of Communication, M/o

Information, M/o Culture, M/o Irrigation & livestock).


37 | P a g e

In 1390, Afs 144,693,511 has been used only for the purpose of improving AFMIS

systems, but the system still does not have the capacity to control the financial affairs of the

government, as we understand that AFMIS system yet does not fully include figures of

advances relating to Mustofiates.

Bulkh province has provided us the information on unadjusted advances of the 5

budgetary units until 18 Saratan 1391 (8 July 2012). The details are as follow:

No Name of the Entity Advances Remained Unadjusted in Afs

1 Central Police Station 2,625,618 2 Environmental Protection Office 133,562 3 Depart of Labor and Social Affairs 1,065,314 4 Air Transportation 6469 5 Road Transportation 103309

Bamyan province has also provided us the information on their unadjusted advances

until 14 Saratan 1391(4 July 2012). The details are as follow:

No Name of the Entity Advances Remained Unadjusted in Afs 1 Admin Depart of Governor Office 1,356,000 2 Depart of Education 49217 3 Central Police Station 1741000 4 Depart of Water Supply 15000

Since Qatia Statements have been submitted to the audit commission on 11 Saratan

1391 (1st July 2012) for audit and inspection, we understand that unadjusted advances of the

above mentioned departments are not included in Qatia Statements. The information from the

two provinces is illustrative and there might be similar cases in other provinces as well.

Qatia Statements are prepared based on data recorded in AFMIS system and no

separate accounting books and records are maintained. Therefore, there is an apprehension

regarding completeness and veracity of records relating to advances, unadjusted advances

and balances, from AFMIS which are combined with separate figures outside the AFMIS. The

MoF attributes this weakness as arising due to the lack of capacity in the provinces rather any

problem in the AFMIS. It may be mentioned that in 1390, MoF spent Afs 382,580,235 on

capacity-building of the MoF staff at the center and the provinces.

4.4 MoF has paid Afs 30 million to the board of cricket in advance, which has not been

adjusted so far.

Comparison of 1390 Unadjusted Advances with 1388 and 1389

Year Total Payments Adjusted Unadjusted % of Adjusted

1388 5,564,981,375 4,340,393,894 1,224,587,481 78

1389 5,460,488,123 3,870,407,409 1,590,080,714 71

1390 5,978,104,653 4,612,589,459 1,365,515,194 77


38 | P a g e

4.5 In 1390, petty cash of Afs 119,175,570 was made available to 44 budgetary units, out of which Afs 118,451,570 was adjusted and Afs 723,930 remained with 13 budgetary units. Further, petty cash of Afs 981,651 relating to 1389 is not settled. Ministry of Finance opined that settlement of petty cash is the responsibility of the concerned organizations.

5. As per the budget documents, reserve fund for operating budget 1390 of Afs 14,954,376,000 with addition of Afs 2,397,000,000 relating to the Central Bank compensation comes to Afs 17,351,376,000. This is 11.5% of the total operating budget, which in comparison of 1389 budget, shows a decline of 54%. During 1390, as a result of requests from ministries and agencies and according to the State President Office decree, a total of Afs 16,878,211,411 has been allocated from reserve and contingency fund. However, Qatia statements do not provide any details of how much of the allotted amount was expensed and how much remained. The concerned departments of the MoF also refrained from providing any information in this regard. 14 budgetary units have the highest allocation of the contingency fund:

Figures in Afs

# Organizations

Amended amount from contingency funds

Total Codes

21 22 23 24 25

1 Ministry of Martyrs. Disabled & Social Affairs

192713645 - - 6730000000 - 6,922,713,645

2 Ministry of Finance 60641314 3710710038 176106159 268680000 16001600 4,232,139,111

3 Ministry of Education 1148857199 400000 - - 1500000 1,150,757,199

4 Administrative Affairs of Ministry Council

176483408 352918963 - 320290000 143408080 993,100,451

5 Ministry of Interior 46429668 56467570 - 486150000 250000000 839,047,238

6 Ministry of Foreign Affairs

95947040 236359791 - - - 332,306,831

7 Ministry of Agriculture 53390052 9550904 - 240000000 - 302,940,956

8 Ministry of Transportation

28426666 43284359 - - 214543754 286,254,779

9 Protection Department of State President

196801500 48152000 - - - 244,953,500

10 President Office 80464333 138186380 - - - 218,650,713

11 General Directorate of National Security

156900000 - - - - 156,900,000

12 Ministry of Haj and Religious

32092995 97723663 - - - 129,816,658

13 Ministry of Urban Development

12401755 9000000 - - 106,500,000 127,901,755

14 Ministry of Public Works 16767614 - - - 87763500 104,531,114

Total 2,298,317,189 4,702,753,668 176,106,159 8,045,120,000 819,716,934 16,042,013,951

14 budgetary units received Afs 16,042,013,951, 95% of the total contingency fund and the

remaining 36 budgetary units received only Afs 836,197,460, 5% of the contingency fund.


39 | P a g e

Further, the following budgetary units received more budgets from reserve fund than their

actual budget:

Amt in Afs

# Organizations Actual Budget Contingency Fund

(%) of utilizing contingency fund in

comparison with actual budget

1 General Directorate of Administration Affairs and Secretariat of Ministry Council

563,254,000 993,100,451 176

2 Ministry of Finance 1,588,805,600 4,232,139,111 266

3 Ministry of Martyrs. Disabled & Social Affairs

946,152,200 6,922,713,645 731

4 Ministry of Urban Development

120,097,000 127,901,755 106.5

As per paragraph 9, Article 32 of the PFEM law, “budgetary authorities for future contingency

expenditures should not be exceeded from 3% of total program expenditure”. However, as per

the figures for the reserve and contingency codes in the Qatia statements, out of Afs

156,360,871,580 operating budget 1390, reserve fund is Afs 16,878,211,411, 11% of total

operating budget. Furthermore, allocation of amount from the reserve fund for the units

mentioned in the table above is against Article 32 of the PFEM law.

Moreover, it was found that in some cases, the reserve funds, which were allocated for certain

items, were not spent. Instead they were amended and utilized for some other items. For

instance, as per MoF proposal and decree of the State President, Afs 80 mill meant for interest

on debt, Afs 50 mill for currency control, Afs 100 mill for Civil Service Reform pay and

grading, Afs 150 mill for ministries and organizations’ membership in international

organizations and Afs 160 mill for MoF share in banks insurance, a total of Afs 540 mill, have

been deducted from the reserve code. The following additions have been made: Afs 250 mill

in code 25 of Ministry of Interior, Afs 90 mill in code 25 of the Ministry of Defense and Afs 200

mill in code 900024 of reserve code for purchasing wheat. Based on the ratification no 15 of

ministries council dated 6/5/1390, a sum of Afs 80 mill from code 900002-Disaster

Contingency Fund, Afs 80 mill from code 900001- Policy and a Afs 80 mill code 900005 –Civil

Service Reform pay and grading had been deducted and added in code 24 of ministry of

agriculture, irrigation and livestock. Similarly, on the basis of the decree no 7909 of the

President Office dated on 10/12/1390, a sum of Afs 93 mill from code 900003 interest on

debt, Afs 89 mill from code 900010 fuel subsidy, Afs 30 mill from code 900008 international

membership by ministries, Afs 8 mill from code 900005 Civil Service Reform pay and grading,

Afs 20 mill from code 900009 fund for PRR and super scale, Afs 10 mill from code 900014

salary increment, Afs 53 mill from code 900020 financial reimbursement and Afs 50 mill from

code 900024 purchase of land have been deducted and added to code 22 for purchasing

wheat by Ministry of Commerce, code 24 for civilian and military officials retirement, code 21


40 | P a g e

of Ministry of Agriculture, Ministry of Information and Culture, General Directorate of

National Security, Commission for Overseeing the Implementation of Constitution and

Supreme Court and code 22 of Ministries of Frontiers, Agriculture, Administration Affairs,

High Office of Oversight and Anti-corruption and Interior.

Such amendments defeat the very purpose of budgetary approvals provided by budget

committee, ministry council and State national assembly. It also indicates less rigourous

preparation of budget.

6. As per proposal of Treasury Department, order of MoF and Form B-23 no. 21592

dated on 15/4/1390, a sum of Afs 200 mill, as per letter no 136537 of Treasury Department

dated on 29/11/1390 and Form B-23 no 122889 dated on 8/12/1390, a sum of Afs 50 mill

has been transferred from the operating budget contingency code 900004 – Foreign Currency

control Fund operating budget to development budget.

7. The PFEM Law under Article 47 (1), provides that “Where requested by a state

administration, the Ministry of Finance, in consultation with the Budget Committee, may

authorize the adjustment of the approved appropriations for that Ministry provided the

adjustment does not exceed 5% of the registered funds”. According to the Qatia statements of

the operating budget 1390, amendment column of outside agency shows that there is an

amendment of 6% in the budget of Ministry of Commerce and 7% in the budget of the M/o of

Public Health. Further, in certain amendment codes, funds from one agency to another agency

go up to 50% or more than that which is against (PFEM) law.

8. In the operating budget Qatia of the Ministry of Higher Education (MoHE),

reconciliation of Qatia account with monthly account statement derived from the AFMIS

showed that in major code 25, object code 25201, a sum of Afs 125,000 - expenses of Baghlan

University and a sum of Afs 75000 - expenses of Kuner Province University were not included

in system and remained uncounted. Likewise, as per the details of the monthly expense of the

centre and the provinces, total expense was Afs 311,156,580 but as per the consolidated

statement in the Qatia 1390 it was Afs 311,188,742, a difference of Afs 32162. MoHE sent the

Qatia of 1390 vide letter no 186 dated on 23/3/1391 to the MoF. Vide letter no 5 of the audit

commission dated on 20/4/1391, the MoHE was informed of the deviation. MoHE after

reconciliation accepted the deviation.

9. As per Forms B-27 (allotments) and B-23 (amendments) related to the operating

budget 1390 of the M/o of Interior, the total allocated amount was Afs 37,770,011,863, but in

the Qatia statements, Afs 37,787,362,605 has been recorded. This shows an excess of Afs

17,350,742 in the Qatia statements. Besides, according to the Form B–27 no 1185 dated on

12/9/1390, amount under code 250 was Afs 22,073,750 but as per the Qatia statements, it

was Afs 27,073,750. Besides, the total amount for the code mentioned above is Afs

2,080,060,750 but as per the Forms, Afs 425,711,500 is recorded. Also, there is difference

between the amount written in figures and in letters. This indicates gap between budget


41 | P a g e

documents and Qatia statements and also lack of adequate care in preparation of the Qatia

statements.

10. Independent Administrative Reform and Civil Service Commission (IARCSC) through

its proposal no 66 dated on 25/11/1389 to President Office suggested a sum of Afs

20,475,000 from 1389 budget for three months expenses for 23 provincial training centers of

civil service institute. The expenses were funded through local governance projects of UNDP/

ASGP. As per decree no 7278 of President Office dated on 22/12/1389, the execution of

mentioned amount was to be from code 95 of Public Administration Reform. As per Form B-

23 no 341 dated on 7/3/1390, from code 95 of 1390 operating budget a sum of Afs

12,478,000 was added to code 21 and a sum of Afs 7,988,000 was added to code 22 of IARCSC.

This is against PFEM law and principle of budget execution.

11. It was found that amendments were made in the reserve codes involving large

amount in the name of Peace Strengthening Commission and Afghan Ulema Council. As per

Forms B-27 and B-23, proposal no 705 of National Security Council Office dated 27/2/1390

and decree no 1220 dated 21/2/1390 and Form B – 23 no 55 dated 14/4/1390, a sum of Afs

22,500,000 was amended from code of 900001-policy. A sum of Afs 17,037,000 was increased

in code 21 and a sum of Afs 4,563,000 was increased in code 22. Based on the proposal no

3158 of the National Security Council office dated on 28/6/1390 and decree no 4706 of the

President Office dated on 6/7/1390 and Form B – 23 no 2020 dated 30/8/1390, a sum of Afs

22,500,000 was reduced from code no 91 and added to codes 21 and 22 of the Peace

Strengthening Commission. In addition, two separate proposals of the National Security

Council office and decree of the President Office, a sum of 36 million was deducted from code

91 and added to codes 21 and 22 of the Afghan Ulema Council. This is despite the fact that the

National Security Council office, the Peace Strengthening commission and the Afghan Ulema

Council are not budgetary units. Such payments do not serve the purpose of transparent.

12. As per the proposal no 386 of Ministry of Commerce dated 4/12/1387 and decree

no 7518 of the President Office dated 28/12/1387, salary of Mr. Sayed Azem Hussaini, former

Advisor in the M/o Commerce, was approved through MCP as per AEP criteria of the IARCSC

until his appointment. Based on letter no 1584 of the IARCSC dated 23/3/1389 and as per

proposal no 991 of the M/o Commerce and Industry dated 4/3/1389, service of Mr. Sayed

Azem Hussaini was continued as per the previous contract vide decree no 1326 of the

President Office dated 21/2/1388 for 3 months with effect from Hamal 1st, 1389. In the

aforesaid letter of the IARCSC, it was suggested that the M/o Commerce and Industry should

take action to accelerate the appointment of nominee through (MCP) program. But in view of

the letter no 77 of M/o Commerce and Industry dated 19/2/1390 and letter no 3528 of the

IARCSC dated 13/5/1390 and Form B-23 no 2771 dated 6/6/1390, a sum of Afs 245,340 for

Hamal month salary has been transferred based on decree no 7518 dated 28/12/1387 from

code 95 to code 21 of the Ministry of Commerce.


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13. According to Article 8 of budget execution manual, in 1390, codes related to electricity

expense, water, cleaning, communication product, repair of vehicles, maintenance and

building renovation were restricted codes and non-transferable to other codes. However,

following amendments have been done:

13.1 Vide Form B-23, no. 650 dated 18/11/1390, as per the proposal of Geodesy and

Cartography and decree of MoF, a sum of Afs 1,600,000 has been amended from restricted

code 221 and added to code 210.

13.2 Vide Form B-23, no. 2522 dated on 19/10/1390 as per the proposal of MRRD and

decree of MoF, a sum of Afs 10 million has been amended from restricted code 221 and added

to code 210.

13.3 Vide Form B-23, no. 34 dated on 17/11/1390 as per the proposal of Science Academy,

a sum of Afs 400,000 has been amended from restricted code 221 and added to code 220.

14. As per the AFMIS system, in the Operating Budget expenditure, a sum of Afs

1,834,885,469 is recorded as unclassified expenditure under Object Code 21128, Sub Major

code 210 – Salaries and Wages in Cash and a sum of Afs 126,778,597 under Object Code

22809, Sub Major code 220 – Usage of Goods & Services, as these expenditures are not

identified specifically with any relevant Object Code of expenditure, except as “Not Elsewhere

Classified”.

As per the international best practices, in the Qatia statements all transactions should be

recognized and classified as per the specified heads/codes of accounts in the Charts of

Accounts (CoA). Further, Qatia statements should follow the same Charts of Accounts (CoA) as

followed for the budget. The PFEM Law under Article 7(7) requires “Maintaining the Treasury

General Ledger and recording transactions according to budget classification and accounting

rules compliant with internationally accepted standards and principles”.

The Charts of Accounts 1390 provides the following object codes for recording of expenditure

“Not Elsewhere Classified”:

21-210-211 Wages and Salaries - in Cash / 21128 - not elsewhere classified

22 -220 – 228 Use of Goods and Services – other expenditure / 22809 - not elsewhere

classified

24 – 240 Subsidies, Grants & Social Benefits / 241 - Miscellaneous Transfers not

elsewhere classified.

As per the above, in 1390, an amount of Afs 1.961 billion, which is 1.31% of total expenditure

in 1390 is recorded as not elsewhere classified. It is therefore recommended that appropriate

effort should be made to classify expenditure to relevant Object Codes and minimize the

occurrence of unclassified expenditure. Government should minimize flexibility of the

agencies/ministries to classify expenditure in other than relevant codes. If necessary, new


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object codes may be opened to bring more transparency in the accounts by minimizing the

occurrence of unclassified expenditure.

Development Qatia Statements 1390

A. Comment on the Development Qatia 1390

Description Amount % of original budget

and Reserve code

Original budget 71,509,884,723 96.6

Reserve budget 2,544,815,000 3.4

Total 74,054,699,723 100

A total sum of Afs 74,054,699,723 was approved as development budget of 1390, including

discretionary and non-discretionary projects, out of which:

Discretionary projects included

New discretionary projects containing a sum of Afs 12,132,267,800; and

Transferred discretionary projects from previous year containing a sum of Afs

6,371,283,100.

Non- discretionary projects included

New non-discretionary projects containing a sum of Afs 30,251,992,700; and

Transferred non-discretionary projects from previous year containing a sum of Afs

25,299,154,100.

B. Summary of development budget with amendment reflected in the Qatia along with

expenditure and remaining amount during the year is as below:

Description Amount

(Afs)

Actual approved development budget 71,509,885,239

Increase in the approved budget 27,941,891,274

Total 99,451,776,513

Decrease in the Total 2,022,917,600

Balance after the amendments 97,428,858,913

Additions of reserve code amount 1,416,996,023

Budget supplement 1,852,653,755

Total appropriation 100,698,508,691

Total expenditure 49,796,569,664

Remaining of the year 50,901,939,027

The figure of the development budget printed in the Qatia shows remarkable changes

compared with the budget at the beginning of year. These budgetary changes in the Qatia


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have been recorded under the heading “difference of actual transferred and estimated

transferred” and budget supplement.

As per the explanation of the Treasury Department of the MoF, actual annual approved

development budget consists of estimated transferred and new budget components and these

will take three possible shapes/conditions in the next year budget:

1. If the project expenditure is equal to the estimated figure in the budget, the amount of expense is

equal to the estimate; in this case, no amount would be added in the estimated and actual

transferred column.

2. If the project expenditure is more than estimated figure in the budget, the amount of expense is

more than estimate; it is recorded in the reduction column of difference between estimated

transfer and the actual transfer.

3. If the project expenditure is less than estimated figure in the budget, in this the amount of expense

is less than estimate, it is recorded in the increase column of difference between estimated

transfer and the actual transfer.

Under estimated transfer and actual transfer, a sum 27,941,891,274 has been increased and a

sum of 2,022,917,600 has been decreased, the difference of Afs 25,918,973,674 has been

added in the original annual approved budget. With addition of this figure, the actual

approved development budget 1390 becomes Afs 97,428,858,913. In fact, the aforesaid

amount includes the remaining fund of transferred projects of the previous year. In addition, a

sum of Afs 1,416,996,023 on account of reserve codes as well as a sum of Afs 1,852,653,755 as

budget supplement has been added in the budget of some ministries / agencies. With these

additions, the total approved development budget of 1390 consists of Afs 100,698,508,691,

35% increase in the original budget as at the beginning of year (which includes original

budget along with the appropriation for reserve code). Out of the total development budget

during the year, a sum of Afs 49,796,569,664 has been spent and a sum of Afs 50,901,939,027

remained; expenditure from the development budget being only 49.5%.

As per the Development budget expenditure contained in the Qatia statements 1390, Afs

28,829,372,740 or about 58% relates to Code 25 i.e., acquisition of assets and a sum of

20,967,196,924 or about 42% of the total expenditure relates to Code 22, i.e., use of goods and

services. It shows that 58% of the expenditure has gone for buildings and structures,

machinery and equipment, valuables, land, etc. and 42% has gone to the payment for use of

goods and services, including for the salaries for the Development Consulting Firms (code

22307) and the Dev. Individual Consultants (code 22308) under code 220 as per information

provided by the General Department of Budget.

As per the information provided by the MoF, out of Afs 49,796,569,664 development budget

expenditure, Afs 13,059,397,952 has been used from domestic revenue including transfer

from treasury balance; Afs 35,086,319,592 from donor’s grant and Afs 1,650,870,124 from

loan. This means, 26% has come from domestic revenue including treasury transfer, 71%

from donors grant and 3% from loan. The funding of the Development budget for 1390 was


45 | P a g e

estimated as Afs 14.207 billion from domestic revenue, Afs 69.985 billion from donors and Afs

4.822 billion from loans. Therefore, realization of the development budget fund vis-à-vis,

estimated sources is 92% for domestic revenue, 50% grants and 34% loan.

As per the development budget, annexure and the information provided by the General

Department of Budget, other than the remaining fund relating to the transferred projects from

1389, the following amounts were also added into development budget of 1390:

a) New commitments for transferred projects

1. As per the decree no. 5372 dated 7/8/1390 of the President office, a sum of Afs 9,400,000

based on new commitment of World Bank for public administration reform project with

code no. AFG/620070 related to IARCSC;

2. As per the decree no. 4599 dated 3/7/1390 of the President office, a sum of Afs

47,000,000 based on new commitment of Reconciliation and Peace Trust Fund for

Manpower Programme Unit with code no. AFG/420320 related to Min of Public Works;


197,400,000 for education Curriculum Development and Learning Material code no.

AFG/270388 related to Min of Education;


76,089,760 based on new commitment of Italy for Supporting National Health

Programmes in Kabul and Heart related to the Min of Public Health;


163,765,720 based on new commitment of Reconstruction Trust Fund for emergency

Project for Horticulture with code no. AFG/390283 related to Min of Agriculture,

Irrigation and Livestock;



Project for Livestock with code no. AFG/390356 related to Min of Agriculture, Irrigation

and Livestock;



Project for Livestock with code no. AFG/390356 related to Min of Agriculture, Irrigation

and Livestock;


64,465,200 based on new commitment of France for Supporting Project of Agriculture

Cooperatives with code no. AFG/390572 related to the Min of Agriculture, Irrigation and

Livestock;


37,600,000 based on new commitment of Islamic Development Bank for Agriculture

Inputs Project with code no. AFG/390596 related to the Min of Agriculture, Irrigation and

Livestock;


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164,500,000 based on new commitment of Development Bank for Rural Agribusiness

Support Project with code no. AFG/390438 related to the Min of Agriculture, Irrigation

and Livestock;


47,000,000 based on new commitment of Germany for Technical Assistance and Capacity

Building Programme for Governmental agencies with code no. AFG/200180 related to the

Min of Finance;

b) New Commitments for New Projects:


47,000,000 based on for Female Youth Employment Initiative project with code no.

AFG/270745 related to Min of Education;


based on commitment of France for new project of Multiplication and Extension of Fishing

and Apiculture Farms with code no. AFG/390614 related to the Min of Agriculture,

Irrigation and Livestock;


based on commitment of France for Artificial Insemination Project with code no.

AFG/390684 relate to the Min of Agriculture, Irrigation and Livestock;


23,500,000 based on new commitment of UNHCR for Support to Grant Management Unit

(GMU) Programme with code no. AFG/290214 relate to the Min of Refugees and

Repatriation;


based on new commitment of Reconciliation and Peace Trust fund for Vocational Training

with code no. AFG/470190 relate to the Min of Labor and Social Affairs;


23,180,400 based on new commitment of Developmental Organization of United State of

America for technical and vocational training project of 120 Trainees with code no.

AFG/470191 relate to the Min of Labor and Social Affairs; (this is not available in the data

of excel sheet)


based on commitment of Reconciliation and Peace Trust fund for Afghanistan Peace and

Reintegration Programme with code no. AFG/200227 relate to the Min of Finance;


105,972,310 based on commitment of World Bank for new project of Financial Sector

Immediate Response with code no. AFG/200229 relate to the Min of Finance;


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In addition, the following new and transferred projects have been considered as

development budget supplements, which are based on decision of budget committee and as

per agencies letters but without approval of competent authorities:

1. As per decree no. 10 dated on 28/9/1390 of budget committee, Afs 12,690,000 from

reserve code for transferred project for constructing wall of 712m alongside new Qala

River to avoid damage to the contagious disease hospital and the residential areas

around that relating to code no. 370722, Min of Public Health.

2. As per decree no. 10 dated on 28/9/1390 of budget committee, Afs 5,640,000 from

reserve code for transferred project for Agriculture Education Project in Badghis

province relating to code no. 390687, Min of Agriculture.

3. As per development budget annex, Afs 4,700,000, based on new commitment of

Agriculture Department of USA for transferred project for management of natural

resource with people’s cooperation, relating to code no. 390124, Min of Agriculture.


Agriculture Department of USA for transferred project for capacity building and

reconstruction of the Extension and Research Department relating to code no. 390244,

Min of Agriculture.

5. As per development budget annex, Afs 22,020,675, based on new commitment of India

for transferred project of SDP in border province (Agriculture development in border

districts) relating to code no. 390395, Min of Agriculture.


Agriculture Department of USA for transferred project to create lab quality control,

strategic reserves and identify plant and animal pests relating to code no. 390498, Min

of Agriculture.


Agriculture Department of USA for transferred project to create an information

management system relating to code no. 390505, Min of Agriculture.

8. As per letter no. 128016 dated on 22/4/1390, Afs 376 million, based on new

commitment of reconciliation and peace trust fund for transferred project of National

Solidarity Programme relating to code no. 430060, Min Rural Rehabilitation and

Development.

9. As per letter no. 128016 dated on 22/4/1390, Afs 141 million, based on new

commitment of reconciliation and peace trust fund for transferred project of National

Rural Access Programme (NRAP)/National Emergency Employment Programme

(NEEP) relating to code no. 430060, Min Rural Rehabilitation and Development.

As per Article 23 of the budget execution manual, it is provided that “…development

budget consisting of discretionary and non-discretionary funds is to be approved at the

beginning and the middle of the year by the National Assembly…but taking decision regarding

discretionary projects is the authority of Government of Islamic Republic of Afghanistan and

for the non-discretionary projects, it is the authority of donors. Therefore, non-discretionary


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projects with their financing sources are to be included in national budget in the fiscal year, as

development budget supplement and are to be sent to National Assembly for information”.

Ministry of Finance is responsible to provide the essential information to the National

Assembly about the status of new commitment for new and transferred projects.

As per the information given by the Department of Budget of the MoF and according to

sanction no. 15 dated on 6/5/1390, essential information in this regard has been sent through

letter no. BSI–9469 by the Ministry of State in Parliament Affairs to the National Assembly.

Based on the information provided by the Budget Department, 42 transferred projects were

removed by the budget committee after evaluation due to completion of projects or non-

payment of committed fund by donors. Details are included in development budget

supplement for 1390.

A total of 614 projects were recorded in Development Qatia, out of which 526 projects are transferred projects and 88 are new projects.

Comparison of Development Budget Realization from 1384 – 1390 (In billion Afs)

Remaining in %

Expenses in %

Remaining Expenses Actual budget approved Year

57 43 29,448 22,243 51,691 1384 46.7 53.7 30,864 35,180 66,044 1385 55 45 39,598 48,171 87,770 1386

40.3 59.7 67,041 45,336 112,377 1387 63.16 36.84 75,397 43,991 119,388 1388 61.05 38.95 67,984 43,381 111,366 1389 50.55 49.45 50,901 49,796 100,698 1390

0

20,000

40,000

60,000

80,000

100,000

120,000

1384 1385 1386 1387 1388 1389 1390

Actual approval 51,691 66,044 87,770 112,377 119,388 111,366 100,698

Expense 22,243 35,180 48,171 45,336 43,991 43,381 49,769

Remaining 29,448 30,864 39,598 67,041 75,397 67,984 50,901


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The chart above shows a slight increase in realization of development budget compared with

previous years, though it is still less than 50%, which is a matter of concern.

C. Major Audit Findings from the Audit of Development Budget

1. As a result of audit and reconciliation of Forms B – 27 (Allocations) related to sustainable

development of natural resources project of Ministry of Mines with code no. 320085, it is

observed that one Form B-27 of Afs 5,067,500 recorded as BEU 346-90 and DAD-0534-90

in the Department of Budget and sent to Treasury Department for processing and

recording in AFMIS, was initially accounted by Treasury department on the basis of a

photocopy of the Form-B under no. 640 in AFMIS and subsequently when the original

copy of the said Form-B was presented, the same was also recorded as no. 824 in the

AFMIS. As per AFMIS, Afs 5,006,862 from allocation no. 640 and Afs 4,999,678 from

allocation no. 824 were withdrawn.

The Treasury Department explained that “original Form B-27, which was issued by BEU

346-90, after receiving from budget department and before recording in AFMIS system,

seemed to have got misplaced and after various reminders of the Ministry of Mines,

Treasury Department asked a copy of the Form-B from the Budget Department and the

said amount was recorded, as the copy was verified by Budget Department and submitted

by the Ministry of Mines. Afterwards, the original Form-B was also found and due to heavy

work pressure and oversight, it was recorded in the AFMIS system again, as submitted by

the Ministry of Mines. The said amounts were utilized by Ministry of Mines and related

expenditure documents are available with SDU. It is also mentioned that there is no

misuse of the said amount.”

Ministry of Mines certified recording of said Form in system twice and expressed that

from the total amount of Afs 10,135,000, they spent Afs 9,611,400 for administrative

expenses and other payments during two quarter through several bills and Afs 523,600

was remaining, which was transferred to 1391.

However, though the Ministry of Mines verified the transactions, this issue and the

expenditures incurred from the concerned Form B, require further audit separately.

2. In Development Qatia statements, Afs 8,385,663,473 has been recorded as advance

payments in 1390. Afs 4,606,506,098 have been adjusted in 1390 and a sum of Afs

3,779,157,375 remained unadjusted. In addition, as per information provided by the

Treasury Department, outstanding advances of Afs 752,033,715 pertaining to 1381–1388

and Afs 1,808,148,048 pertaining to 1389 are still unsettled. Ministry of Finance

expressed that the settlement of aforesaid outstanding advances is the responsibility of

concerned agencies and explained that the issue was pursued through several circulars,

but the concerned agencies have not been able to settle their advances.

3. As per reconciliation of Forms B – 27 (Allocation) with allocation figures in the Qatia

statements, it is revealed that in 13 projects, the figures in Forms B-27 do not match with


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that given in the Qatia statements; in 5 projects, the amounts in Forms are more than the

amount in Qatia and in other 8 projects, the amount as per the Forms is less than that

recorded Qatia.

4. The following projects were not included in budget document but were recorded as

transferred projects in budget supplement and Qatia Statement of 1390:

4.1. Project for reconstruction, preservation and maintenance of historical monuments,

code no. AFG/360073 involving Afs 2,510,740 related to Min of Information and

Culture;

4.2. Project for reconstruction of 10 historical heritages in Kabul and provinces, code no.

AFG/360151 involving Afs 10,283,600 related to Min. of Information and Culture;

4.3. Reconstruction and rehabilitation of Kabul Theater, code no. AFG/360153 involving

Afs 25,850,000 related to Min. of Information and Culture;

4.4. Project for establishment of center for treatment of drug addicts in provinces, code no.

AFG/ 370548 involving Afs 1,619,620 related to Min. of Public Health;

4.5. Project for Orchards, Forestry and Check Dames in Nangarhar province, code no. AFG/

390318 involving Afs 637,790 related to Min. of Agriculture;

4.6. Project for capacity building and improving budget execution system (Budget

Module), code no. AFG/ 200098 involving Afs 6,916,990 related to Min of Finance.

4.7. Project for Commission for coordinating transition process, code no. AFG/200223,

involving Afs 21,150,000 related to Min of Finance.

5. As per the budget document 1390, the total budget of 1389 for procurement for

laboratories relating to Mines and Liquid gas in Kabul and provinces, code no. AFG/

580006, was US$ 300,000 (Afs 14,100,000). However, the budget supplement and the

Qatia statements reflect US$ 700,000 (Afs 32,900,000). With the addition of Afs

38,089,971 from deductions within agency (project for procurement and purchase of

laboratory equipments for food items, health items, etc.), the total budget became Afs

48,131,999. Out of this, a sum of Afs 34,574,585 was spent and Afs 34,800,711 remained

as balance.

The Budget Department was asked to clarify the matter; however, they did not provide

any information in the matter.

6. As per the statements of cash balance (Treasury Afs Account 600100 and USD Account

600102) pertaining to the operating budget 1390, a sum of Afs 13,310,355,362 (Afs

13,289,153,609 from 600102 and Afs 21,201,753 from 600100) was transferred to

development budget. Out of this, a sum of Afs 13,059,379,952 was spent and a sum of Afs

250,975,410 remained. It is felt that the remaining amount should have been

retransferred to the treasury accounts (600100 and 600102), however, the aforesaid

amount was not transferred to the said accounts.

Treasury Department of the MoF opined that remaining amount is as sub-account of

(600100 and 600102) and its transfer of non-transfer does not have any meaning.


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7. As a result of letter no. 207/594 dated on 13/4/1390 of the Secretariat of Peace Council

and as per letter no. 128016 dated on 22/4/1390 of the Accounting and Financial

department of the MRRD, US$ 18 mil has been committed for 3 programmes of MRRD:

US$ 10 mil for National Solidarity Programme;

US$ 6 mil for National Rural Road Construction Programme;

US$ 2 mil for Regional Growth and Development Programme.

However, as per the development budget supplement, US$ 8 mil for National Solidarity

Programme and US$ 3 mil for National Rural Road Construction programme had been

recorded. MRRD was requested to provide explanation though no formal correspondence

was made.

8. As per development budget supplement of 1390, total development budget of 1390 after

amendments during the year was recorded as Afs 111,989,769,870. As revealed in the

budget and development budget supplement and the Qatia statements 1389, the total

development budget 1389 was Afs 111,440,851,527 and total expenditure Afs

43,381,864,945, which left a balance of 68,058,986,582. However, as per the 1390 budget

and Qatia statements, balance transferred from 1389 to 1390 was Afs 68,685,961,520.

Therefore, it appears that a sum of Afs 626,974,938 has been transferred to 1390 in

excess than the actual balance due for transfer.

However, this difference is shown as a result of exchange rate variation by the Budget

Department.

9. It was found that 19 projects, which were considered in budget of 1389 for financing from

loans, were recorded as projects under grants in budget documents and development

budget supplement of 1390.

Budget Department clarified that “Most of the development projects are financed through

donors’ grants and the nature of some of the contracts combine loan and grant

components. Further, not all the loan is payable in one year and are spread over several

years. Therefore, these projects are reflected in budget as a whole in one section, loan

and/ or grants for last several years. But after evaluation, projects which are financed

through loans and / or both “loan and grants” have been segregated and reflected in

budget 1390.”

As per budget 1390, 12 projects were shown as being financed through loans. However,

in 1390 development budget supplements, all projects were recorded as discretionary or

non-discretion projects and it was difficult to differentiate, which projects were financed

through loans and which one through grants.

As per the development budget 1390 at the beginning of the year, budget supplement and

the information provided by the Department of Budget, financing of the development

budget 1390 through loan was budgeted for Afs 4,822,000,000 including loan from


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previous years. However, as per Revenue Qatia 1390, the following amounts have been

received:

From World Bank Afs 179,981,873

From Asian Development Bank Afs 1,118,745,977

From other donors Afs 352,142,274

-----------------------------------------------------------------------

Total Afs 1,650,870,124

This shows that balance loan of Afs 3,171,129,876 due remained unrealized. As per the

information provided by the Treasury Department, during 1390, a total of Afs

133,686,949 has been paid as interest on loan and related administrative expenses.

10. In 1390, total development budget of Afs 100,698,508,693 was appropriated for 611

projects. Overall, less than 50% of total appropriations were spent. Out of 611

development projects included in the development budget 1390, Qatia statements

revealed that 161 projects had no activity and remained unimplemented. This comprised

an appropriation of Afs 11,961,438,436, 12% of total appropriation of the concerned

agencies in which no expenditure was incurred.

The following 10 ministries and independent agencies share the major portion of

unimplemented projects in which no activities have been reported:

Agencies No. of project activities to be implemented

in 1390

No. of project activities which

were not implemented in

1390

Appropriations in the budget against which no activity

took place (in Afs)

27. Min of Education 28 5 494,903,890 28. Min of Higher Education

32 11 348,546,360

34. Min of Communication 10 3 293,671,510 37. Min of Public Health 43 11 872,562,403 39. Min of Agriculture 47 9 745,539,880 41. Min of Energy and Water

57 13 1,150,473,520

42. Min of Public Work 51 17 3,808,906,743 43. Min of Rural Rehabilitation and Development

24 2 257,278,000

82. Independent department of water supply and canalization

5 3 258,500,000

83. Brishna/ Power Enterprise

19 15 2,051,550,000

From the table above, it can be seen that unimplemented projects mainly relate to four

sectors, Education, Public Health, Agriculture and infrastructures. Non-execution of

several projects in such important sectors does not promise well for the pace of overall


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development, as lack of utilization equals to lack of achievement of the set physical

targets and inadequate performance in the priority areas.

Therefore, it is recommended that Government should establish mid-term evaluation

mechanism for important projects to accelerate the execution of projects and

programmes without cost and time over-run.

Revenue Qatia Statements 1390

A. Evaluation of Revenue Plan of 1390 and its Realization:

According to the information provided by the Department of Revenue, the estimated

revenue plan for 1390 was below:

Central agencies Afs 36,348,000,000 Mustofiats Afs 11,636,000,000 Customs Afs 56,070,000,000 ------------------------------------------------------------------------ Total Afs 104,054,000,000

Estimate Revenue for 1390 was Afs 104.054 billion, out of which Afs 100.785 billion was accounted as realized (due) and Afs 99.396 billion was collected. Estimated revenue, revenue due and realized, collected and remaining pertaining to 1390 as per Revenue Qatia is summarized below:

Figures in Afs

Code Description Anticipated

plan of 1390

Revenue

assessed for

realization

Revenue

collected

Remaining

11

Tax Revenue (fixed taxes,

income taxes, property tax,

sales tax)

51,334,144,156 46,169,376,314 45,226,762,468 942,613,846

12 Custom duties and Fees 32,967,980,518 30,546,444,738 30,546,444,738 -

13

Non-Tax Revenue (income

from capital property, sale of

goods and services, royalties,

admn. fees, fines and

penalties)

16,396,710,941 20,703,290,235 20,257,589,981 445,700,254

14 Miscellaneous Revenue 835,851,538 321,357,391 321,214,036 143,355

15 Sale of Non-current assets

(land and buildings, SOEs) 38,889,687 59,397,097 58,958,497 438,600

17 Social Contributions 2,481,102,672 2,985,482,766 2,985,388,624 94,142

19 Grants as per national

budget 1390 66,710,000,000 60,409,106,144 60,409,106,144 -

General balance without code 19 104,054,679,512 100,785,348,541 99,396,358,344 1,388,990,197

General balance including code 19 170,764,679,512 161,194,454,685 159,805,464,488 1,388,990,197


54 | P a g e

As per Revenue Qatia Statements, estimated revenue plan including for code 19 (foreign

grants) is Afs 170,764,679,512, out of which Afs 161,194,454,685 was revenue assessed for

realization, Afs 159,805,464,488 was reported as collected. This shows a decline of Afs

3,269,330,971, 3.14% in realization of domestic revenue and Afs 6,300,893,856, 9.4% in

realization of foreign grants.

As per the national budget 1390 and development budget supplement, portion of the

domestic revenue which has gone in financing operating budget is Afs 84,015,198,000 and in

financing development budget, it is Afs 14,207,649,220; total Afs 98,222,847,220. This shows

an increase of 2.5% in revenue realization.

The details of anticipated and realized revenue of foreign grants in financing operating budget

of 1390 are explained in the table below:

Sources

Anticipated

revenue as per

the budget

Revenue

collected

(%) of revenue

assessed for

realization

(%) of deficit

ARTF 9,400,000,000 6,046,630,497 64.3 35.7

LOTFA 25,638,750,000 25,074,910,751 97.8 2.2

CSTC-A 31,672,171,300 29,183,284,834 92 8

Donor grants as

per agency’s

receipts

- 104,280,062 100 -

Total 66,710,921,300 60,304,826,082 90.4 9.6

B. Comparison of anticipated, realized and collected domestic revenue from 1384 – 1390:

Figures in billion Afs

(%) of revenue

assessed for realization

Remaining revenue

Revenue collected

revenue assessed

for realization

Anticipated revenue

plan Year

98.70 0.284 22.646 22.930 18.318 1384

97.70 0.720 31.079 31.799 29.078 1385

97.30 0.872 33.662 34.534 40.840 1386

101.88 1.023 45.485 46.509 45.649 1387

111.25 1.405 63.830 65.236 58.635 1388

92.00 1.490 80.477 81.967 89.041 1389

96.85 1.388 99.396 100.785 104.054 1390

The table above shows an increasing trend of revenue assessed for realization since 1384 –

1389, as the increase in realized revenue in 1385 compared to 1384 was 38.6%, in 1386

compared to 1385 is 8.6%, in 1387 compared to 1386 is 34.6%, in 1388 compared to 1387 is

40.2%, in 1389 compared to 1388 is 25.6% and in 1390 compared to 1389 is 23%.


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In Revenue Qatia Statements, receipts for development budget are reflected as follows:

S/No Donor

Chapter 14

Miscellaneous

Revenue

Chapter 18

Loans

Chapter 19

Grants Total

1 Discretion fund 41,539,854 - - 41,539,854

2 ARTF - - 13,140,516,376 13,140,516,376

3 World Bank - 179,981,873 7,222,301,970 7,402,283,843

4 ADB - 1,118,745,977 6,936,781,288 8,055,527,265

5 Other donors - 352,142,274 7,786,719,958 8,138,862,323

Total 41,539,854 1,650,870,124 35,086,319,592 36,778,729,570

During 1390, Afs 36,778,729,570 was total receipt from miscellaneous sources, grants and

loans from international institutions and foreign governments for funding the development

budget. In view of Afs 74,692,641,760 anticipated from grants and loan for financing the

development budget, it shows a deficit of 49%.

0

20

40

60

80

100

120

1384 1385 1386 1387 1388 1389 1390

Revenue Realization and Collection from 1384 - 1390

Revenue assessed for realization

Revenue collected


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C. Major Audit Findings from the Audit of Revenue Qatia Statements

1. Audit findings with regard to preparation of the revenue plan, revenue assessed for realization and revenue collected show that revenue plan of 1390 was not prepared accurately and comprehensively as scientific standards for estimation was not applied and the past revenues based on the activities of the agencies were not taken into account. Therefore, differences have been observed in revenue realization in comparison with anticipated plan in certain agencies as shown below:

Agencies Anticipated

revenue plan

Revenue

collected

Differences between plan and

revenue collected

(%) of increase /

decrease

Increase Decrease Increase Decrease

Min of Finance 29,343,207,774 24,614,217,524 - 4,728,990,250 - 16

Min of Foreign

Affairs 899,690,000 670,537,483 - 229,152,517 - 25

Min of Interior 2,780,320,000 3,155,646,488 375,326,488 - 13 -

Min of Mines 65,790,000 2,598,676,259 2,532,886,259 - 3849 -

Min of

Communication 2,168,050,000 4,062,590,977 1,894,540,977 - 87 -

Min of Energy

and Water 13,450,000 91,899,243 78,449,243 - 583 -

Min of

Transportation

and Civil Aviation

3,123,190,000 2,992,380,238 - 130,809,762 - 95

Min of Labor,

Social Affairs,

Martyrs and

Disables

1,476,540,000 1,365,908,785 - 110,631,215 - 92

Attorney General

Office 26,570,000 65,149,676 38,579,676 - 145 -

Independent

Election

Commission

3,910,000 62,689,473 58,779,473 - 1503 -

Upper House/

House of

representatives

5,000,000 1,345,300 - 3,654,700 - 26

Lower House 5,330,000 134,871 - 5,195,129 - 2


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In addition, an analysis of reports of M–29 (revenue reports) of Mustofiats reveals that there are remarkable differences in revenue collection in comparison to revenue plan as shown below:

Mustofiats /

provinces

Anticipated

revenue plan

Revenue

collected

Differences between plan

and revenue collected

(%) of increase and

or decrease

Increase Decrease Increase Decrease

Parwan 144,310,000 201,039,455 56,729,455 - 39 -

Logar 85,090,000 141,262,846 56,172,846 - 66 -

Paktiya 283,107,158 455,470,281 172,363,123 - 60 -

Nangarhar 14,349,711,449 9,766,240,522 - 4,583,470,927 31

Kunar 445,951,930 742,839,442 296,887,512 - 66 -

Badakhshan 170,105,732 267,493,960 97,388,228 - 57 -

Takhar 179,655,811 314,690,930 135,035,119 - 75 -

Kunduz 1,124,830,396 1,442,077,005 317,246,609 - 28 -

Balkh 12,475,521,153 9,406,185,241 - 3,069,335,912 23

Herat 17,504,692,529 19,075,682,606 1,570,990,077 - 8 -

Farah 617,452,353 1,003,117,347 385,664,994 - 62 -

Nemruz 4,412,389,992 3,884,228,950 - 528,161,042 11

Helmand 400,090,000 694,451,065 294,361,065 - 73 -

Kandahar 4,470,319,033 3,734,410,398 - 735,908,635 16

Zabul 40,990,000 183,691,677 142,701,677 - 348 -

Khost 799,720,000 1,495,277,223 695,557,223 - 86 -

The Department of Revenue claimed that while preparing the revenue plan, all accepted

machanisms and standards, revenue collected in 1389, revenue as percentage of the GDP,

trends of inflation, etc., were tken into account.

However, the existance of large differences in anticipated plan and collected revenue in 1390

indicates that the concerned authorities did not fully grasped various sources of income and

could not aportion properly revenue plan figures for cental and provincial/local agencies. As

per the revenue plan, a lump sum figure was given to each central agencies, Mustofiat and

custom as revenue plan and not as per the classification of revenue vis-à-vis codes 11 – 15,

17 and 19 and sub-classification thereunder. While the revenue plan 1390 was prepared as

per segregation of central departments, mostofiats and customs, revenue realized and

revenue collected were not separated in the Revenue Qatia statements. Therefore, it was

difficult to know performances in mustofiats and customs vis-à-vis plan realization and

revenue collection.

2. As per budget document 1390, domestic revenue is budgeted as of Afs 93.66 billion,

though the revenue plan prepared by Deputy Minister of Revenue and Customs was Afs 104.5

billion, which shows lack of coordination between these budget and revenue planning entities

in the MoF. In addition, the portion of domestic revenue in the national budget considered for

financing the operating budget was Afs 84.015 billion and the development budget Afs

12.139 billion (which was increased to Afs 14.207 billion in the development budget


58 | P a g e

supplement); a total of Afs 96.154 billion. While the budgeted revenue was Afs 93.66 billion,

the financing plan for Afs 96.154 billion seems to suggest lack of proper planning and

coordination in budgeting.

3. A reconciliation of revenue figures of Revenue Qatia 1390 with that of 1389 suggests

differences in transfer of remaining revenue of 1389 to 1390 as detailed below: Figures in Afs

# Revenue Code

Total remaining

revenue of 1389

transferable to

1390

Transferred

Revenue Difference

1 11. Tax revenue 1,068,708,053 926,769,689 141,938,368

2 13. Non-Tax Revenue 421,353,955 421,313,331 40,624

Department of Revenue indicated that the difference of aforesaid figures was due to mistakes

in recording of remaining balance of previous years. They informed that the Directorate of

Revenue of Mustfiat of Khost Province by mistake recorded Afs 189,962,036 as previous

years’ due balances in Qatia of 1389 while the due balances printed in the Qatia of 1390 was

Afs 23,368,286, a difference of Afs 166,593,750. This has been rectified. However, as Qatia

financial statements are conclusive and final report of the government’s financial transactions

during a fiscal period, they should reflect accurate figures.

It is also mentioned that in the Revenue Qatia Statement 1389, there was a difference in due

balances transferable from 1388 comprising Afs 37,025,284 in code no. 11, Afs 58,542,791 in

code no.13 and code no. 17 Afs 507,690. The security situation was cited as reason.

It is felt that existence of such differences in Qatia statements puts the accuracy of financial

and Qatia statements under doubt.

4. As per central departments plan, Afs 340,000 has been included under the heading of

unclassified revenue, besides central departments plan, but no agency for its realization and

collection was identified. It was also not reflected in the Revenue Qatia.


59 | P a g e

Chapter Five: Miscellaneous matters

Audit of Budget Realization of Kabul Municipality

As per Article 25 of the PFEM law “Municipalities are responsible to submit their budget

execution report through relevant mustofiat at least every six month to MoF.” The Supreme

Audit Office (SAO) undertook audit of Kabul Municipality simultaneously when audit of Qatia

statements 1389 was undertaken. However, audit learnt that Kabul Municipalities did not

submit budget execution report to MoF in compliance of the requirement of Article 25 of the

PFEM law. MoF also did not follow up for the submission of the report from the Kabul

Municipality. SAO had recommended that in compliance of the requirement of Article 25 of

the PFEM law, Kabul Municipalities should submit budget execution report to MoF.

During the audit of Qatia statements 1390, the issue was pursued by SAO and it was observed

that Kabul Municipality had still not sent any report to the MoF. As such, the SAO’s

recommendation, which was also verified by sanction no. 7 dated on 18/2/1391 of the

Ministry Council, was not given effect. Audit commission of Qatia statements 1390 undertook

audit of the budget realization of Kabul Municipality simultaneously with audit of Qatia

statements of 1390.

The audit result is presented briefly below:

A. Expenditure

As per the budget documents at the beginning of the year, development budget supplement

and Qatia statements 1390, approved development budget of the Kabul Municipality, after

amendment during the year, was Afs 1,393,110,868. The budget consisted of 20 transferred

projects covering previous year projects running through 1383 – 1388 and one new project.

Development budget of the Kabul Municipality along with amendments during the year,

expenditures and remaining budget is as bellow:

Descriptions Amount in Afs Remarks

Original approved

development budget

712,802,000 -

Increase 676,390,630 -

Total 1,389,192,630 -

Decrease 1,320,700 -

Balance after amendment 1,387,871,930 -

Addition of Reserve Code 5,238,948 -

General budget 1,393,110,878 -

Total expenditure 716,166,120 Budget utilization

51%

Remaining 676,944,758 49% budget not

utilized


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As obvious from the table above, out of the total development budget of Afs 1,393,110,868 of

the Kabul Municipality in 1390, Afs 716,166,120 was spent and Afs 676,944,746 remained;

which shows budget utilization of 51%.

The Development Qatia statements 1390 of the Kabul Municipality shows that out of the 21

projects included in development budget 1390, 20 were transferred projects from previous

years since 1383 and one project was new. Only five projects were completed and funds

relating to 3 projects were decreased during the year. Based on the information given by

concerned project departments, the asphalt covering of Ahmad Shah mina road through

Bagrami was completed and balance fund was adjusted into Dasht Barchi and Ibni Sina – Bagh

Qazi roads projects. Construction work of Wazir Mohammad Akbar Khan road in Shirpoor

area was stopped for several years due to local problems. The related fund was adjusted in

the project of Ibni Sina – Bagh Qazi road. In addition, 6 projects did not have any expenditure

and expenditure in few other projects was less than 30%.

The reasons for lack of proper utilization of the developmental budget were explained by

Kabul Municipality as follows:

1. Environmental sanitation project, a non-discretionary project related to the World

Bank, was cancelled due to changes in World Bank policy;

2. Problems in acquisition of property of residential nature alongside the Chehel stone

road, as the owners did not agree for acquisition and allocation of alternative land for them;

3. Disagreement against removal of obstacles in front of the Kabul province headquarters

and delay in expanding the road;

4. Delay in construction work of central heating of first makroryaan, though list of all

equipment and shortages had been sent to Ministry of Economy through maintenance

department of makroryaan, due to non-processing of procurement, it is still not finalized;

5. Project for constructing canal for Airport blocks was included in the total development

budget of the Municipality, but the same is still not finalized between the Ministry of Defense

and the Kabul municipality.

In addition, heavy traffic and problem of interruption of traffic during office timings, non-

cooperation from security agencies in removal of obstacles in business areas and carrying of

construction materials that at times cause stoppage of projects.

Some of Kabul municipality development projects are being financed through domestic

revenue generated by the Municipality. In 1390, Afs 2.250 billion of revenue was anticipated

by the Municipality, though operating budget of the Municipality approved for 1390 was Afs

2,535,991,000. This means a budget deficit of 12% vis-à-vis anticipated revenue. Out of Afs

2,535,991,000 of the operating budget, Afs 1,019,991,000, 45% has been allocated for salaries

and common expenses and Afs 1.516 billion, 55% for common development projects. Based

on the anticipated plan for 1390, 26 construction projects in Kabul city were considered.


61 | P a g e

Out of the common development budget of Kabul Municipality, Afs 410,407,781 was reduced

during the year and after amendment the budget came to Afs 1,105,592,219. Out of this, Afs

845,267,468 was reported as spent up to the end of the year and Afs 260,324,751 remained,

which amounts to 76% of budget utilization.

Work of 12 non-discretionary development projects financed through International Aid

Institutions have been undertaken in different districts of Kabul city for an amount of US$

25,382,219 and €1,450,248 through the budget of the Municipality. In addition, 3 projects of

road construction, construction and asphalt covering of Dehmazang road up to Darulaman

palace, construction and asphalt coverage of Mirwais Maidan road up to Dorahi Company and

construction and asphalt coverage of Ahmad Shah Mena road up to Jalalabad highway run by

(P.E.C) group of Turkey from Abu Dhabi are in progress.

B. Revenue

Anticipated revenue plan of the Kabul Municipality for 1390 consisting of Afs 2,250 million

(realized revenue Afs 2,933,539,949, collected revenue Afs 2,529,892,093 and

remaining/unrealized amount Afs 408,647,856) showed 30% increase in plan realization. The

remaining amount was on account of M/s Osman Ghani Co, contractor of constructing Chahar

Darwaza Mandawi of Kabul city. Based the on contract requirement, annually 20% of revenue

of four Mandawi in Chahar Darwaza of Kabul belongs to Kabul Municipality and 80% to the

contractor.

Comparison of revenue in 1389 & 1390 Figures in Afs

Year Anticipated

Revenue Plan Realized Revenue

Collected Revenue

Remaining Revenue

(%) of Realization

1389 2,000,000,000 2,387,097,964 2,112,303,252 274,794,712 119 1390 2,250,000,000 2,933,539,949 2,933,539,949 - 130

Realization of the revenue plan of 1390 compared with that of 1389 showed an increment of

22%. However, as per a review of documents, Afs 389,711,043 from city transportation

service was included in the revenue of 1390 of the Kabul Municipality, which was not

anticipated in the plan of the Kabul Municipality previously. As a result of this inclusion, the

said increase is reported.

C. Land Distribution

Based on the information provided by the department related to land distribution, in some of

the residential projects, distribution of land during 1390 was as follows:

1. 3 plots in lieu of property for different projects;

2. 1905 residential plots for Padollah project;

3. In Khoshhal Khan Mena, 26 plots which had already been distributed, were processed in 1390;

4. 192 plots were distributed in Qala e Zaman Khan in lieu of their properties,

5. 130 plots were distributed for instructors of university of education in Chehel dokhtaran project in

lieu of their lands in Ahmad Shah Baba project;

6. In Ahmad Shah Baba project, 72 residential plots were distributed.


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Miscellaneous Information

1. As per the information provided by the Treasury department of MoF, the total amount of

foreign aid since the establishment of the provisional government up to now consisted of

US$ 68.8 billion. Out of which US$ 12.3 billion has been expensed through government

budget and remaining US$ 56.5 billion has been expensed directly by donors;

2. The Department of Budget reported Afs US$ 10 billion as the total amount directly spent

by the donors in 1390. However, no document was presented to the audit commission in

this regard;

3. Based on the information given by the custom department of MoF in response to an

inquiry letter of the audit commission, during last 3 years (1388 – 1390), the entire goods

and commodities of the foreign organizations imported in the country was valued at Afs

1,891,114,234,352. The custom duty thereon would come to Afs 414,245,485,245.

However, as per the agreement of SOFA, ATM and other international agreements, their

goods and commodities are exempt from custom duty. The details are as below:

Custom Duty Exemption in Last 3 Years

Year Value of

Imported Goods / Items

Forgoing Custom Duty

Value

Value of Imported Goods

/ Items

Forgoing Custom Duty

Value

Collected Revenue from Custom Duty

Forgoing Revenue

According (%) of

Custom Duty

Solar US$ US$ Afs Afs Afs (5) as % of

(6) 1 2 3 4 5 6 7

1390 19,371,610,481 2,154,100,335 968,605,819,459 107,705,016,732 30,546,444,738 352.59

1389 13,713,280,928 1,440,775,126 686,234,202,849 72,038,756,305 27,704,567,219 260.02

1388 15,486,309,086 1,314,829,448 780,583,088,881 65,741,472,377 21,796,927,401 301.61

Total 48,571,200,495 4,909,704,909 2,435,423,111,189 245,485,245,414 80,047,939,358


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Chapter Six: Defects and Deficiencies & Recommendations

While auditing of Qatia Statements of 1390, a range of defects and deficiencies were

observed in the performances of concerned agencies in the MoF and budgetary units.

1. Ministry of Finance and budgetary units have not implemented the pervious

recommendations of the SAO given after the audit of the Qatia statements of 1388 and

1389;

2. Despite previous recommendation for simultaneous and timely availability of Qatia

Statements (operating and development) to the audit commission, submission of Qatia

statements 1390 were again delayed and that too were submitted at different times to the

audit commission. Qatia statements of operating budget expenditure were delayed by 10

days, development budget expenditure by 42 days and revenue Qatia by 47 days as from

1st Saratan 1390. Compared with the year 1389, there was a delay of 4, 13, and 21 days

respectively.

3. Cooperation of certain accounting officers of the MoF with the audit commission was not

satisfactory.

4. Delay in submission of relevant documents and information required for audit and in

some cases, even unnecessary and extra information / document was given to the audit

commission, which actually created unnecessary diversions.

5. Documents related to allocations, issue of allocations and amendments in budgets were

scattered and disorderly; forms related to development projects not maintained project-

wise; alteration were made in figures and even correction were made with lotion;

recording of figures in Afs and foreign currency without even mentioning any specific

exchange rate in some forms; difference in numbers and letters while writing figures in

some cases.

6. Differences of figures printed between budgetary forms of certain units and Qatia

statements and AFMIS system.

7. Existence of 27 codes in reserve code, some of which were unnecessary.

8. Amendment in restricted codes in certain budgetary units as well as in code 21 and

transfer to other codes, which is against budget execution principle.

9. Existence of Afs 12,141,247,430 deficit in development budget.

10. Audit commission was unable to find out how much of the reserve fund amount, from

which code and for which purpose has been applied by different agencies, as Qatia

statements do not separately provide budget reconciliation, agency-wise, for the

expenditure of the appropriations from the reserve and contingency funds for both

operating and development budget. The expenditure from the reserve and contingency


64 | P a g e

funds are included as part of the overall expenditure. Recording of reserve fund as part of

the total expenditure in Qatia does not give separate budget reconciliation against the

appropriation.

11. Lack of agreement in the figures related to reserve funds provided by the department of

budget to the department treasury.

12. Lack of coordination between the budgetary department, treasury department and

revenue department in interpretation of various aspects of the financial performances and

usage of fiscal expressions.

13. Lack of settlement and collection of advances on time. E.g., as per Qatia statements,

unsettled advances pertaining to 1381 -1387 was Afs 791,765,614, 1388 was Afs

433,867,259, 1389 was Afs 1,456,255,073, a total of Afs 2,681,887,946 and 1390 was Afs

1,365,515,194 are pending for settlements/adjustments. This shows lack of concern on

the part of the related agencies and the MOF in ensuring timely settlement of aforesaid

advances.

14. Differences in the figures of advance payments and unadjusted advances printed in the

Qatia statements with that in the AFMIS system.

15. Non-inclusion in AFMIS system of the figures of the advance payments by the provinces

and non-inclusion of unsettled advances of certain provinces in the Qatia statements.

16. As per the decision of the budget committee regarding the payment of cost of the embassy

building in Canada, which was proposed by Ministry of foreign Affairs, the budget

committee rejected the proposal, as payment was already made. As per the information

given by Ministry of Foreign Affairs, the file of Mr. Wahid Munawar, former General

Counsel of Afghanistan in Canada relating to payment of the balances was sent to the

Attorney General Office. However, no information has been provided in this regard.

17. Revenue and custom were part of audit plan of the audit commission. However, due to

lack of proper cooperation and non-availability of files and documents from the concerned

agencies as well as assignment of different audit groups from Attorney General Office,

National Security and anti-corruption office caused diversions in performances of Qatia

audit team and the team was unable to have access into required information and

document in time.

18. Lack of adequate care by the budgetary units and the MoF in settling petty cash.

19. Non-utilization of a high percentage of development budget, which shows lack of capacity

in utilization of development budget within the agencies.

20. Non-realization /non-utilization of a substantial part of the loan in development budget, as

out of Afs 4,822,000,000 loan included in the development budget of 1390, only Afs

1,650,870,124 was utilized and Afs 3,171,129,876 remained. In 1390, Afs. 133,686,949 has

been paid as interest on the loans.


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21. Multiplicity in the design of revenue plan and difference in anticipated domestic revenue

plan in the National budget and anticipated plan printed in Qatia statements.

22. Revenue plan of 1390 was not prepared accurately and by applying scientific standards by

taking into account the various activities of the agencies. Therefore, a significant difference

has been seen in revenue realization in comparison with anticipated plan in certain

agencies.

23. A sum of Afs. 3,269,330,971, 3.14% deficit has been seen in domestic revenue realization

in comparison with anticipated plan.

24. Difference in transfer of remaining amount from 1389 to the Qatia of 1390, as the transfer

was less by Afs 141,938,368 in chapter 11 and Afs 40,624 in chapter 13 than the original

remaining amount.

25. Non-compliance of Article 25 of the PFEM law regarding reporting about execution of

municipality’s budget by the Kabul Municipality.

26. In Kabul Municipality, Form B-27 was not prepared for allocations for the first quarter of

1390 and the allocations were not recorded in Form M-20.

27. Form B-23 (amendment and transfer) has not been prepared for amendment of fund from

code 25 to code 22. Amendment was prepared and executed through system as per the

municipality office order and did not take the agreement with MoF in account.

28. A Financial Management Information System (FMIS) has been set up in the Kabul

Municipality. FMIS is being used by the Municipality for all its financial transactions,

though no pilot has been completed and no test has been conducted for satisfying its

working, control system and effectiveness. Further, there is lack of adequate capacity in

the related sections to operate and own the system.

Recommendations

Results of the audit of the Qatia statements 1390 revealed that Ministry of Finance did not put

into effect the pervious recommendations of the SAO. Therefore, with the reference to

recommendations, once again we draw your attention to the following issues:

1. According to the Article 98 of the Constitution Law and Articles 55 and 59 of the PFEM

law, period for preparation and audit of the Qatia statements has been specified up to the

end of Sunbula of current fiscal year. On the other hand, as per the INTOSAI standards, it is

required that the SAO informs the competent authority of the MoF about audit findings of

the audit of the Qatia statements before submission of final report to concerned authority

and after discussion on audit findings, send final results of audit to concerned authority at

specified time. However, a period of first six month of the next fiscal year is specified for

both preparation and audit of Qatia statements. Delay in submission of statements of Qatia

accounts due to any reason whatsoever will limit the period of audit, which is specified in

the Constitution law and the PFEM law and will have negative impact on audit results and


66 | P a g e

their submission to the concerned stakeholders. Therefore, MoF, in cooperation with other

budgetary units, is responsible for preparing statements of Qatia accounts for the

operating budget expenditures and development budget expenditures and Revenue Qatia

accounts by the end of the first quarter and submit them to the audit commission for audit

w.e.f. first of the Saratan month

2. Since the MoF is responsible for consolidating the statements of Qatia accounts, their

preparation requires cooperation of budgetary units and mustofiats with the MoF.

Therefore, it should be communicated to all the budgetary units to cooperate with MoF

and submit their Qatia statements and all related documentation of financial reports in

time to the MoF. Those agencies that are defaulting and cause delay in preparation of

Government’s consolidated statements of the Qatia accounts should be held responsible

for this.

3. No financial report and document would be accepted without prior signature of the

controlling authority in the MoF. Special attention of the concerned officials is invited

towards this.

4. Audit results of the statements of the Qatia accounts 1390 and previous years show that

some of officials related to accounting in the MoF did not cooperate with audit commission

in making documents available and providing responses to the audit observations/

inquiry letters of the audit commission. In some cases required documents and responses

to the inquiry letters took more than one month, which caused delay and difficulties in

completion of audit and finalization of audit results. Therefore, attention of the competent

authorities in the MoF is drawn towards ensuring cooperation with the audit commission

for next audits.

5. Any information without supporting documents or information which is unauthenticated

or any information which is extra and irrelevant to the related subject provided to the

audit generally hinders smooth audit. Therefore, it is requested that in future the MoF

should pay due care to the audit queries and the information required and provide

relevant and complete information with supported documents.

6. To ensure completeness and accuracy of documents, it is required that all related

documents of allocation orders, budgetary amendments and other documents should be

listed properly before submitting to audit commission. List of documents should be signed

and stamped by related officers.

7. Unlisted, scattered and disorderly placed forms relating to development projects cause

problems in reconciliation and result in wastage of time of the audit commission as well as

the related accounting officers. To avoid such difficulties in future, it is requested to

segregate the relevant documents project-wise and arrange them in accordance with date

of the issuance of forms.

8. Alterations in figures and their erasing and use of correction lotion in accounting

documents, especially on figures, affect transparency. This should be avoided.


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9. Figures should be in numbers and letters and relevant figures appearing at different

places in the forms (in front and back of forms) should be fully in accord with each other.

If otherwise, it should be accepted.

10. Inclusion of any figures in the AFMIS system and the statements of Qatia accounts on the

basis of photocopy or any copies, which are not in original, should be strictly avoided.

11. Besides the AFMIS system, it is required to maintain accounting books and documents,

until enough capacities are developed for full usage of the AFMIS system and the system is

fully functional by inclusion of the financial transactions of the center and the provinces.

12. While preparing fiscal reports and statements of the Qatia accounts, the MoF should not

rely solely on the information taken from the AFMIS system, but should ensure its

accuracy by reconciliation as per accounting books and documents.

13. To avoid probable misusage of resources, efforts should be made to establish efficient and

effective controlling system (Internal control) and establishment of accounting

department as an independent unit from Treasury Department. Controlling financial

activities of the budgetary department, treasury department, revenue department and the

budgetary units is essential.

14. Qatia accounts audit reveals that due to lack of adequate care of certain budgetary units

and the MoF in settlement of advances in time, a huge amount of advance payments are

pending for settlements. Therefore, serious attentions of the concerned agencies are

drawn for ensuring settlement of advances in time. To avoid any accumulation of

unadjusted advances and difficulties in their settlement, it is required to stop execution of

next bills of the concerned entity/persons pending settlement of their pervious bills.

15. All budgetary units should be required to prepare their budgetary plan on operating

expenditure by considering actual expense requirements with view to better utilization

keeping in view the financial status of the country.

16. While preparing development budget, priority should be given to infrastructure projects

that provide opportunities for more employment and help in reduction of unemployment

in the country and increase social welfare and economic growth. Serious attention should

be paid for full utilization of the development budget.

17. To help avoid deficit in the budget, proper attention should be paid while preparation

budget and projects without firm financing sources should not be included, as it causes

unnecessary budget deficit.

18. In development budget expenditure, serious attention should be given to implementation

of projects, as they are financed from loans and foreign grants.

19. Ministry of Finance and Ministry of Economy in close cooperation with other agencies

should strengthen mechanism/put in place an effective and efficient mechanism to

monitor developmental projects and take action for removal bottlenecks/difficulties in

their execution.

20. Financial transactions should be recorded in relevant sections and as per relevant

accounting codes, as any wrong and improper accounting classification will affect

transparency.


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21. In order to transparently reflect which budgetary units received how much amount from

which of the reserve codes and how much was used for what purposes, it is required to

prepare and present reserve code wise budget-expenditure reconciliation statement

separately and enclosed it with statements of the Qatia accounts.

22. It is necessary to record the equivalent amount of foreign currency in Afs along with

exchange rate in the Forms related to development projects.

23. Any changes in the approved operating and development budget ceilings in any codes or

subjects should be approved by the national assembly before its utilization.

24. The requirements of maintaining several reserve codes, which are not unnecessary,

should be reviewed.

25. Since reserve funds are included in the National budget for meeting special and

exceptional cases, which could not be anticipated by the concerned agency, amendment in

the reserve funds in unnecessary cases should be avoided.

26. Establish coordination in working amongst Treasury, Budget and Revenue departments.

27. No action has been taken on the file of due balances of Mr. Wahid Munawar, former

General Councilor of Afghanistan in Toronto, Canada which was submitted through

Ministry of Foreign Affairs to Attorney General Office. This should be looked into.

28. Audit result of Qatia accounts 1390 revealed that there are differences in the design and

preparation of Revenue plan, as anticipated revenue plan in National budget was Afs 93.66

billion but domestic revenue for financing operating budget was taken as Afs 84.015

billion and for development budget, Afs 12.139 billion (this was increased to Afs 14.207

billion in development budget supplement), a totally of Afs 96.154 billion, which is more

than the revenue plan. Further, revenue plan by deputy of revenue and customs

anticipated revenue of Afs 104.054 billion. Therefore, it is required that deputy of revenue

and customs works in close coordination with the budget department in preparation of

specific plans for revenue realization and collection to avoid differences. Anticipated plan

of revenue by the department should not be inconsistent with anticipated domestic

revenue printed in budget.

29. Despite increase in revenue realization and collection that indicates effective measures by

MoF in last few years, some remarkable differences have been observed in anticipated and

realized plan of customs, mustofiates and agencies. This shows that revenue plan has not

been prepared based on facts and reality and activities of entities in a scientific and

standardized manner. It requires review of revenue planning system and anticipation of

income sources of the country. It is necessary to prepare revenue plan after professional

analysis and assessment based on scientific and acceptable methods and standards by

considering practical possibilities of realization by the agencies.

30. It is better that revenue department of MoF informs all relevant units to send their

revenue reports accurately and with supported documents to MoF. Since Qatia account

indicates final accounts of the State’s fiscal activities in a specific year, therefore, changes

in revenue figures after preparation of Qatia account would not be acceptable.


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31. As per article 25 of the PFEM law, Municipalities are responsible to report about their

budget execution to MoF at least every six months through relevant Mustofiats. But it is

observed that the Kabul Municipality has not sent any report to MoF. Therefore, it is

required that this should be considered and compliance should be ensured.

32. Some developmental projects in Kabul city and in its districts have been either stopped or

are progressing very slowly which causes problems for the people. Attention is required

for implementation of the development projects.

33. All budgetary amendments and issuing of allocations should be covered as per the

provisions of the PFEM law.

34. Budgetary figures as per budget document and changes therein after processing of Forms

B-23 and B-27 should be included in AFMIS system as per the PFEM law.

35. To record allocations and expenses, allocation orders should be used for recording in the

M-20.

36. For better application of the AFMIS system and for avoiding any probable misuse, specific

and practical action should be taken for capacity development of staffs who are involved

in operating of the system.

As per the above, audit report of Qatia accounts 1390 is prepared and is being presented to

SAO for giving opinion and sending to concerned agencies.

Best Regard

(Audit Commission of Qatia Accounts)