Understanding the audit report exposing irregularities in Pakistan’s defence sector

An audit of Pakistan’s defense sector has revealed grave financial irregularities, non-transparent procurements, and unauthorized expenditures.

In response, the Auditor General of Pakistan (AGP) has urged authorities to strengthen internal controls and hold those responsible accountable.

But what is the AGP office, and how significant will this report be?

The AGP office is Pakistan’s supreme audit institution, tasked with ensuring public accountability and fiscal transparency in government operations. The office works to improve financial discipline and internal controls within executive departments to reduce waste and prevent fraud.

Pakistan’s current AGP is Muhammad Amjad Gondal. Appointed under Article 168 of the Constitution, the AGP is constitutionally required to submit the audit report to the president and provincial governors. They share the findings with the National Assembly and provincial assemblies.

The Public Accounts Committee (PAC) of the respective legislatures examines these reports. The PAC may conduct hearings on specific matters in an audit report and subsequently issue its own report and recommendations.

The AGP report focuses on systemic issues and audit findings with high monetary value. Less significant issues are addressed by Principal Accounting Officers (PAOs) in departmental accounts committees (DAC) meetings. If the PAOs fail to take appropriate action, these audit observations are highlighted in the next year’s audit report presented to the PAC.

The report

The latest report for audit year 2023-24 identified a range of recurring irregularities, likely due to inadequate oversight or poorly designed internal controls.

“Although many audit entities have internal audit setups, the financial irregularities observed during the current audit reflect that this function failed to deliver effectively,” the report states.

Auditor General Pakistan Report For The Audit Year 2023-24

It adds, “The Ministry of Defence receives a single-line budgetary grant, which is distributed among the Ministry of Defence Production, Services Headquarters, Inter-Services Organizations, and Strategic Planning Division.”

Auditor General Pakistan Report For The Audit Year 2023-24

The audit identified key issues, including non-compliance with Defence Services Regulations, unauthorized advance payments, splitting of financial powers, non-recovery of rent and allied charges, non-deduction of applicable taxes, violations of public procurement rules, and unauthorized work.

The defence services were allocated Rs1.563 trillion for the 2022-23 fiscal year, later increased to Rs1.592 trillion through supplementary grants. The audit report expressed concern over the defence formations’ poor compliance with audit objections over the past 40 years, noting that efforts to regularize accounts have been insufficient.

The AGP noted, “The Ministry of Defence complied with 659 out of 1,974 PAC directives, indicating a slow compliance rate of only 33.38%. The principal accounting officer should take necessary steps to expedite compliance with PAC directives.”

Auditor General Pakistan Report For The Audit Year 2023-24

What analysts think

Senior journalist and analyst Umar Cheema believes the report contains “very interesting facts” every year but is not given the value it deserves. “Giving it more importance could make the system more efficient and transparent,” he added.

Journalist Khaleeq Kiani noted that while the AGP’s findings are valuable, the benefits of highlighting irregularities can only be realized through swift accountability. He mentioned that delays in action often mean that those responsible have either left the country, retired, or passed away by the time the PAC addresses the issues.