Government auditors facilitate the accountability of governments to legislatures and citizens across the world. Aside from enhancing transparency of operations, auditors’ work provides an independent opinion on whether tax payers’ money is being used for its intended purposes and in compliance with applicable laws, rules and regulations. Government auditors are required to be independent to carry out their work professionally.

The office of the Auditor-General of Pakistan (AGP) is established under Article 168 and, therefore, maintains absolute discretion in determining the extent and nature of audits. The constitution protects the tenure of this office and indicates the procedures for removing the AGP from this post.

The officials of the AGP are subject to a Code of Ethics that requires them to work independently. While the constitution gives the AGP the kind of independence envisaged in the standards, the institutional arrangements for government auditing make it difficult, if not impossible, for the AGP to carry out its work effectively.

The AGP operates as an attached department under the Ministry of Finance (MoF) and must negotiate with the MoF when it needs to have additional positions for its office beyond established limits. Even when the AGP’s budget has been approved, it is not uncommon for the MoF to slash the AGP’s budget during the year — irrespective of how it hurts the AGP.

The institutional arrangements for government auditing make it difficult, if not impossible, for the officials to carry out their work effectively

Government auditors are, therefore, treated and regulated as civil servants since they are recruited through a combined Central Superior Services (CSS) exam. Therefore, the AGP is not free to determine its human resources policy, and government auditors are frequently deputed to executive offices — a practice that creates a conflict of interest in many cases.

An officer may work as Finance Director in the National Highway Authority (NHA) and, subsequently, be posted as a Field Audit Officer (FAO) responsible for the audit of the NHA. Similarly, senior officers of the AGP based in ministries engage with FAOs for audit reviews. This erodes “absolute authority”.

The independence of a junior officer of an AGP based in an FAO may be impaired when he or she engages with a senior executive-side officer of the AGP.

The federal government separated audit and accounting functions as part of public financial management reforms (PFM) in 2001. However, this did not result in the break-up of the Pakistan Audit and Accounts Service (PAAS) into two specialised civil service cadres, ie Accounts Service and Audit Service, as intended. The AGP continues to be the cadre administrator of PAAS civil servants to this date.

The quality of accounting and auditing functions continues to suffer because of this dysfunctional arrangement. Most officers of PAAS prefer working as accountants with the executive rather than as auditors. This weakens audit functions and, resultantly, prevents government auditors from delivering high-quality audit products and services.

Many of the issues highlighted above should be resolved once accounting and auditing are effectively separated.

Though the 18th Constitution Amendment has expanded the mandate of audit to cover all public sector entities, and the Supreme Court has reiterated this in its judgments as well, some government entities still maintain that they are not under the audit jurisdiction of the AGP.

Similarly, instances of some audited entities not providing requisitioned records are common, as reported in audit reports. The law states that an officer not cooperating with an audit can be prosecuted under the Efficiency and Disciplinary Rules of the federal government.

However, a clearly defined course of action leading up to the accountability of the delinquent officers has not been established. Even in cases where the Public Accounts Committee (PAC) comes to the rescue of the AGP, the process is lengthy and subject to many delays. These constraints impair audit independence materially.

Article 171 of the Constitution stipulates that audit reports of the federation shall be submitted to the president and those of the provinces to their respective governors. The president and the governors will present the reports to the legislature.

The legislature at both federal and provincial levels has rules to manage its business, but no timelines are established for the disposal of audit reports. The absence of any timelines increases the risk that audit reports are not referred to PACs and discussed within a reasonable time after being submitted by the AGP.

The government auditing standards emphasise that government audit offices reach out to the media, citizens, and civil society organisations (CSOs) to make their work more relevant and visible.

In recent years, the AGP has taken many steps, with financial support from the World Bank, to overcome this end. Audit reports are now publicly available. Citizens are asked to suggest auditable topics under the Citizens Participatory Audit (CPA) Policy. Field Audit Offices (FAOs) have been directed to carry out CPAs and Impact Audits away from traditional compliance/transaction-based audits.

Furthermore, an Audit Management Information System (AMIS) has been rolled out, making audit processes more transparent and accountable and enabling the PAC to effectively follow up on audit recommendations. Government entities have access to AMIS to provide feedback on audit findings.

A lot, however, remains to be done if the government audit function can be made meaningful in line with best international practices.

As the new government takes on a myriad of challenges, it may be worthwhile to revamp the institutional arrangements for government auditing to enhance its independence. This is all the more critical given that the PAC is not robust and needs a higher level of professional support from the AGP. A number of critical steps need to be taken for this purpose.

The PAAS needs to be bifurcated into two specialised cadres, namely Accounts Service and Audit Service. The recruitment of officers for the Audit Service should be done through a separate specialised competitive exam, and the AGP should independently manage all HR matters of the staff belonging to the Audit Service.

Moreover, the AGP should not be an attached department of the MoF. Legal framework for the AGP should be revamped to establish clear mechanisms as to how the audited entities not cooperating with audit would be taken to task. The institutions of local fund audit should be abolished and an appropriate methodology devised for systemic audit of this tier of government across the country.

Rules governing the referral of audit reports to the legislature need to be updated to allow prompt disposal of audit reports. The AGP should establish a framework for stakeholder engagement to promote awareness of its role, establish its credibility, and influence demand-side pressure for accountability.

The first step in this direction is modifying existing legislation to put things on the right track. The sooner the government takes the lead on this front, the better.

The writer is a former civil servant who now works as a freelance consultant with international financial institutions

Published in Dawn, The Business and Finance Weekly, March 11th, 2024