Citing irregularities, a former member of the K-Electric Board of Directors questioned the integrity of financial results and alleged illegitimate build-up of more than Rs375 billion claims by the power utility against the federal government.
He made these remarks in a 15-page letter addressed the Pakistan Stock Exchange (PSX), Securities and Exchange of Pakistan (SECP), National Electric Power Regulatory Authority (NEPRA) and the ministries of finance and power.
Asad Ali Shah – who is also a former president of the Institute of Chartered Accountants Pakistan (ICAP) – said he had been pointing out irregularities in financial accounts of the utility for many years as a member of the board and the audit committee.
However, the K-Electric management, its majority board members and the external auditor — AF Ferguson which is a partner of PricewaterhouseCoopers (PwC) — did not correct the situation to the accounting standards and also did not register objections raised by Shah and Naveed Ismail — another board member.
He also said that not only K-Electric’s receivables but its cumulative profits were overstated by a huge amount of Rs53.5 billion with an insufficient disclosure to highlight material uncertainties with respect to recovery of such amounts in the financial statements.
These claims were based on a misstatement of facts and misrepresentation of court orders and NEPRA determinations, Shah added.
He said the auditors charged not only for auditing and accounting services but also as advisers when they pleaded K-Electric’s tariff petitions before NEPRA which was a clear conflict of interest. It pointed out the violation of regulatory rules and regulations by KE for many years in heavy debt write-offs and subsidy claims without approval from regulators.
Shah also raised questions over the treatment of illegal connections and the connections given without identity cards for the purpose of receivables. He said he was writing to the regulatory bodies and the federal ministries since KE was a public interest organisation and still had about 26 percent government shares after the company and its auditors did not address the concerns.
He deplored that the state’s nominees on the board were incompetent or unaware of the situation and asked the government to nominate financially qualified members on the boards of all SOEs.
On the other hand, K-Electric and Shabbar Zaidi (former chairman FBR and ex-partner AFF-PwC) shrugged off such allegations. Salman Hussain, the incumbent senior partner PwC, declined to comment, saying it was against his firm’s professional standards.
A K-Electric spokesperson said there was no substance to the letter which was purely an attempt to malign. “Our accounts are fully compliant with all the relevant rules and regulations including the International Financial Reporting and Accounting Standards”.
They would take appropriate legal action as well as file formal complaints with ICAP regarding the member’s letter that was defamatory in nature and mala-fide intent, the spokesperson added.