Audit report finds serious irregularities, malfunctioning; Prime time rates not raised since 1999; chairman،-MD being offered other big responsibilities
By Muhammad Saleh Zaafir
The titanic of the electronic media known as PTV is sinking since the auditors have revealed massive irregularities and weaknesses in the overall system of the organisation and expressed pessimism about its future.
The report has been submitted to Dr Shahid Masood, Chairman/Managing Director PTV who took over the state-run TV in June last. He has sent an SOS to President Asif Ali Zardari in the light of the report with the remarks, “I am quite perturbed over the comments. It shows the significant risk of irregularities and misfeasance if the current situation continues.”
He attached the report with his letter to the president. The Chairman/MD has observed that the PTV is currently facing various financial and operational issues, which include losses from core operations, heavy reliance on license fee, high human resource cost, low employees productivity and lack of overall business direction.
The chairman/MD has emphasised on the need for a conscious decision to move PTV towards a self-sufficient and sustainable enterprise by carrying out a comprehensive re-structuring of the organisation within a progressive strategy. Dr Shahid Masood has strongly endorsed the report and recommendations submitted by the auditors.
“I am seriously of the view that the suggestion and recommendations given in the final draft report should be followed in spirit and form,” the chairman/MD added.
He has solicited the views and advice of the president and asked for his agreement with his comments for approval to proceed as suggested.
It should be noted that Dr Shahid Masood had taken the responsibilities of PTV head as a challenge. He wanted to improve the matters within the PTV. However, with the passage of time he came to know about depressing state of affairs in the institution. The first thing he did as the PTV chairman was that he hired private renowned auditors.
The comprehensive audit report pertaining to the working of the official TV channel has pointed out that the cost per employee is rupees 420,000 per annum while revenue per employee is rupees 418,000. They have shown their dissatisfaction over PTV News performance and reminded that PTV News channel performance has been below par as channel brought only five per cent of total PTV advertisement revenue, which was 276 million rupees in 2008. They have also alarmed that per program cost has been increased by 52 per cent in the same year.
Well placed sources discussing the report told The News here Thursday that auditors are critical about the cash flow dependency on license fee revenue. The PTV cannot rely on license fee revenue, as any time this can become a political issue on the other hand without this revenue stream PTV cannot run its operations and this can create serious cash flow problem.
Interestingly major non-governmental political parties have already brought the issue on their domestic agenda to take it up in the Parliament. The report says that the contribution of core operation revenue, advertisement sales is very low as it is only 42 per cent while revenue from license fee has been the major contributor which is 54 per cent.
The auditors have recommended that this is not feasible revenue. Heavy reliance on license fee can hurt company in future, moreover, core operations continued to incur losses during last 5 years. The advertisement sales yearly trend has been dropping very alarmingly from 60 to 42 per cent in three consecutive years, which was 60 per cent in 2005, 48 per cent in 2006, 40 per cent in 2007 and 42 per cent in 2008. This shows inefficiency of sales and marketing department. On the other hand, other C&S channels have grown considerably, the report added. In a startling assessment the report suggests that minus license fee revenue losses could have been much higher and entire net equity of the company would have been wiped off in the last 3 years.
The auditors don’t recommend that license fee should be relied upon as sustainable revenue stream as many experts and legislators have brought up the illegality of the issue in the Parliament as well.
They have severely criticized the heavy HR cost which is 45 per cent of the total revenue equalling 2.3 billion rupees. This is more than advertisement sales, which is 42 per cent of the total revenues.
The auditors have pointed out that cash inflow improvement is not due to revenue but injection from government against deposit for issue of shares. This has played the major role in improving cash liquidity since all locations are incurring losses.
The report says that the DSO has gone up from 171 days in 2004 to 289 days in 2008, with total receivables of Rs2 billion. The recovery of debts has been major concerns for PTV as Rs611 million are outstanding for more than one year and the auditors have warned that there is not much hope to recover this amount entirely.
They also have pointed out that on overall bases recoverable amount is 40 per cent of PTV annual revenue and 30 per cent of total assets of the company. This shows inability to recover its outstanding receivables.
The report has disclosed that despite all the locations are proving loss centre, PTV is significantly injecting cash in non-productive capital projects as it injects Rs276 million in 2007, Rs870 million in 2008 that indicates increase of 215 per cent mainly on new locations. As per auditors comments this is causing negative impact on cash liquidity. It is apparent from the balance sheet that creditors, accruals and other liability have gone up from Rs90 million in 2007 to Rs1.33 billion in 2008 which is a matter of concern for the stakeholders.
The auditors have compared profitability of PTV with the industry. They have indicated that the PTV gross profit is 16 per cent while the industry rate of profit is 30 per cent. The auditors have hinted that non-existence of any long-term business plan could harm the organisation up to great extent.
The auditors have recommended the management that PTV should immediately make a five-year business plan. According to the report, the PTV has five operational centres and they all are in losses. The auditors pointed out that out of 87 Re-broadcasting Station only 12 are viable. The discounts offered on sale of commercial time ranges could go up to 75 per cent and they have pointed out that PTV is not utilizing in-house resources for production. Its 88 out of 133 producers did not produce any programme during last 2 years. In-house production has been giving gross losses; it is revealed by the auditors that gross loss was 61 per cent in 2008. The auditors have shown their serious concerns over lack of consistency and transparency in the procurement of the programs. They have shown their concern over procurement of 77 archival programs i.e. the program that has been previously telecast on PTV or any other channels at a cost of Rs112.5 million.
These programs were purchased in bulk to settle the receivable from Sports Star International and Media Experts. This entire program could not recover their cost as these were telecast in non-prime basis. The auditors criticized bidding of airing rights that no cost benefit analysis is being carried out for events before bidding for airing rights. On average three out of five purchased events incurred losses.
The auditors revealed that net loss from sports programs amounting to Rs83 million during 2008. Asia Cup & Twenty-20 rights cost 108.6 million, with a loss of 5.2 million. Pakistan & South Africa Series right cost 89.6 million, loss of 44 million. It is further revealed that no CBA was carried out before bidding of sports programs amounting to $16 million during financial year 2008.
The auditors also highlighted the program inventory issue. Resources have been wasted in piling up program inventory as 77 programs were purchased of Rs112 million in 2006 and since then only 21 programs have been aired. Several programs were at the higher rates than the rates approved by board of directors for that particular category.
The auditors revealed that PTV has not consolidated the financial statement of the subsidiary company “Shalimar Recording and Broadcasting Company Limited” in accordance with the requirements of International Accounting Standards. The auditors are critical about the irregularities found in purchase of 1970’s movies. From Eveready Pictures movies were purchased at a cost of Rs60,000 whereas same profile movies were purchased from Eveready Communication at a cost of Rs800,000
The auditors found that competitive process was not followed in engaging PTCL for transmitting the PTVC program in USA and Canada for a period of ten years. It is further pointed out that payment amounting to $880,000 due from Indus Entertainment against up-linking facility has not yet been received. The receivable amount of Rs52 million from Sports Star International was adjusted against purchase of 30 programs in March 2007 and out of 30 programs only five programs have been aired so far.
The auditors have shown their concern that no details are available for the revenue generated from airing these programs. The auditors have shown their dissatisfaction that PTV has engaged Global Digital Network (GDN) & Sound View Broadcasting (Pvt) Limited (SVB) for marketing and sale of its commercial time for PTV Global in USA and UK. The GDN was allowed to air advertisements without having received the minimum guarantee amount, the report said.
The auditors further revealed that GDN has yet to make payment for USA region, whereas USD 802k have been aired since Jan 2008 by GDN and minimum guarantee payment is still outstanding for both the territories.
The report said that the rates for global subscribers not specified in agreement with M/S Echo Star. They have found in the books that payment made for the program purchased from M/s AKS Entertainment and broadcast Marketing is in violation of modes & terms of payment.
The auditors warned that non-compliance with applicable accounting/report framework may lead to material information remaining un-reported. The auditors criticized ineffective budgeting process since serious cash flow problem as license fee is sustaining PTV operations. The significant increase in non-productive capital projects of Rs165 million in 2007 to Rs870 million 2008 has negative impact on cash liquidity. The PTV has not increased rates of prime time since 1999. These two hours bring more than 75 per cent of the total PTV revenue.
The auditors have recommended that PTV should increase its rate urgently. Recently a few private channels have already increased their rates this month by around 40 per cent and some other channels are also following the suit, the report added.
When this correspondent contacted responsible officers of the PTV to know about their reaction to the auditors report, they said the implementation of the auditors’ recommendations for the improvement of PTV matters is not possible.
It is also learnt that Dr Shahid was offered other big responsibilities by the government.
Source: The News, 19/10/2008