The present government, since its election campaign days, has claimed among other things to promote the accountability process and strengthen the institutions while introducing the necessary reforms. Recently, two developments have taken place which would have a far-reaching impact if implemented on the working and output of one of the constitutional institutions, namely the Auditor General of Pakistan (AGP). One of these developments is the view expressed in an opinion given by the office of Attorney General in case of audit of regulatory authorities and the other is the reaction of the government towards the AGP’s findings in the Covid-19 Expenditure Audit Report. Both of these developments demand to bring better understanding and appreciation of the role and function of the AGP and the contributions audit reports make in ensuring efficient and effective parliamentary oversight which ensures a robust accountability process in the country. Any action taken in haste in this regard would have far-reaching consequences for the working of a constitutional body like AGP. The audit plays an important role in the overall accountability framework through reporting and feedback to the parliament and other stakeholders about the management of public resources by the executive.
All modern and democratic states have established various accountability institutions in their respective systems. The purpose of such institutions is to protect the public interest and to promote transparency, fairness, equity, good governance and fight against corruption in a country. Under the overall political and administrative dispensation, the Constitution of Pakistan 1973 has established the institution of the AGP, which is responsible to assist parliamentary oversight through the annual scrutiny of public expenditure and revenues. The parliamentary oversight in the case of public expenditure is carried out by the Public Accounts Committee on the basis of the AGP’s annual audit reports. The AGP plays a vital role in providing assurance to the parliament and public that hard-earned public money is spent legally and validly within parameters of rules, regulations, procedures, controls and checks. The AGP therefore audits the ministries, divisions, departments and autonomous bodies including regulatory authorities and local bodies’ institutions at the federal and provincial levels to protect public interest and ensure financial accountability.
Public sector auditing by AGP needs to be seen in the much wider perspective of accountability and governance rather than considering it merely a mechanical exercise to review the accounts or balance sheet of an entity. In the case that regulatory authorities say that the audit of i. “economy of administrative services, ii. efficiency of utilisation of human, financial, and other resources, iii. effectiveness of performance is beyond the scope of the AGP”, this means that putting a limitation on the scope and nature of the audit is against the spirit of provision of the Constitution. By this interpretation, the office of the Attorney General is suggesting that the AGP is only required to attest the financial statements of the Regulatory Authorities. The view expressed in its opinion about the AGP by the office of the Attorney General in case of regulatory authorities is not in consonance with the generally accepted best international public sector auditing practices.
Under the overall scheme of the Constitution of Pakistan 1973, the AGP is responsible for public sector auditing in Pakistan. The Attorney General in its opinion has discussed Articles 169 and 170 of the Constitution in detail and has pointed out that “Article 170 is not a stand-alone Article and does not vest any extra power in the Auditor General other than that prescribed under Article 169”. The Articles 169 and 170 of the Constitution of Pakistan 1973 provide framework of AGP’s mandate in respect of accounting and auditing functions. The Articles 169 and 170(i) of the Constitution spell out a broad functional framework of AGP in relation to the accounts of federation and provinces or any authority or body established at federal or provincial levels. Under the provisions of Article 169 of the Constitution and Audit and Accounts Order 1973, the AGP had been performing the accounting function till 2001, when two separate laws namely the AGP Ordinance 2001 and the Controller General of Accounts (CGA) Ordinance 2001 were introduced and the accounting function was transferred to newly established entity that is the office of the CGA. Now the AGP, under Article 170(i) of the Constitution has the power to provide direction to the Federation and provinces to keep their accounts in “such form and in accordance with such principles and methods as the Auditor-General may, with the approval of the President, prescribe”. It becomes abundantly clear that the AGP was relieved of his accounting functions (except provision of Article 170(i)) when the organisation of the CGA was established in 2001 with the mandate to perform the accounting function of federation and provinces. Therefore, Article 169 of the Constitution relates to accounting matters only and does not stipulate any connotation in relation to the audit function of the AGP.
It is a misconception that while auditing the Regulatory Authorities, the AGP assumes the role of a “super regulator”. Both Regulatory Authorities and the AGP function under their respective distinct mandates. While auditing the regulatory authority the AGP reviews and examines records (both financial and non-financial) and highlights matters relating to financial prudence, compliance to rules, management of public funds, transparency in operations and achievement of objectives for the information of parliament and other stakeholders. The regulator on the other hand regulates a specific sector and is responsible to provide guidelines, make decisions, monitor, supervise and ensure efficient implementation of policies and take action where policies and decisions are not followed. There is no overlapping of functions between a regulatory authority and audit by the AGP.
The findings of an audit report cannot be termed as cases of corruption and losses only as has been conceived by a segment of society in the case of the Covid-19 Expenditure Audit Report. The findings of the AGP’s compliance with authority audit reports including the Covid-19 Audit Report highlight primarily financial irregularities which inform the reader about instances of misgovernance, mismanagement of public funds, imprudent financial decision making, a weak compliance regime and weak financial and administrative controls leading to wastage of public funds, cases of loss and misappropriation and instances of lack of transparency in the public sector operations. Therefore, each finding of the AGP needs to be reviewed and commented on the basis of its merit and should not be termed as corruption. However, it is also important that instead of imposing any restriction on the scope and nature of audit the executive branch must do some introspection to assess why similar types of irregularities have been reported in the AGP’s audit reports every year. This situation speaks to a lack of action and the absence of an adequate response by the government managers to improve their financial management operations and create a transparent and responsive system ensuring compliance to rules and checks.
For auditing regulatory authorities, the AGP should issue some guidelines as has been done by SAI India for such audits which should make a clear distinction between the “Quasi- judicial functions and auditing around quasi-judicial functions” of regulatory authorities, the review of “the process of reaching decisions, the availability of all required information and the implementation of decisions, excluding legality and justice ability”. The AGP should engage with Regulatory Authorities to reach a consensus to audit the latter so that the constitutional mandate of the AGP remains intact and at the same time regulatory entities also have clarity on matters of audit. In this way, the process of parliamentary oversight and accountability would remain strong and effective. It’s better to strengthen the AGP institution and facilitate its smooth functioning rather than curtailing the role of the audit institution that reports and informs stakeholders on the important issues of financial management in the country on an annual basis. Audit should be considered as friendly critique and not as an adversary because the purpose of an audit is to bring improvement in the performance of public sector organisations.
The writer is
the Former Auditor General of Pakistan.
Public sector auditing by AGP needs to be seen in the much wider perspective of accountability and governance.