ISLAMABAD: In an interesting tug of war with the finance ministry, the Auditor General of Pakistan (AGP) is resisting the audit of the accounts of his own office to avoid ‘infringement upon its independence’.

Created under Article 170 of the Constitution, the AGP is a constitutional body responsible for examining public accounts of all tiers of the governments to rule out fiduciary concerns in utilisation of public money.

Informed sources told Dawn that since January this year, the country’s top auditor had repeatedly declined audit teams sent by the external auditor appointed by the President of Pakistan to have access to its accounts of the last three financial years — FY2016-17 to FY2018-19.

The sources said the external auditor had complained to the president, prime minister, adviser to the prime minister on finance and finance secretary that the audit process of AGP accounts, which started in January 2020, had been blocked by the AGP office on one pretext or the other despite repeated requests.

Interestingly, the AGP had complained to the Public Accounts Committee of the National Assembly on multiple occasions that various corporation and government agencies were not allowing audit by the AGP even though every rupee out of the public money was required to be audited to avoid irregularities, misuse of funds and corruption.

External auditor complains to president, PM; Officer says finance and law ministries misinterpreting independent auditor definition

As required under Section 19-A of the Auditor General’s (Functions, Powers and Terms and Conditions of Service) Ordinance, 2001, President Arif Alvi, on the advice of the prime minister, appointed Additional Secretary, Ministry of Finance, Dr Arshad Mahmood as external auditor on May 23, 2019 to audit expenses made by the AGP.

The external auditor sent three separate teams to conduct audit of various AGP offices with the request to make record of three fiscal years available.

Section 19A says: “The President may appoint an independent officer to audit sanctions to expenditure accorded by the Auditor General. The AGP shall produce for inspection all books and other documents relating thereto and give him such information as he may require for the purpose of audit.”

However, the AGP declined the audit initially on grounds of capacity and conflict of interest of the finance ministry and then objected to the ‘scope of audit’ by limiting it to include only the inspection of sanction orders and to see if such orders had been approved by the competent authority or not.

A senior AGP officer said the ministries of finance and law were “misinterpreting independent auditor as external auditor coming from the finance ministry”.

The finance ministry took up the matter with the law ministry for legal opinion and clarification.

The law ministry clarified that “Section 19-A of the AGP’s Ordinance 2001 is unambiguous in this regard and may be applied in letter and spirit”.

The AGP did not agree and declined to allow commencement of audit till its nature and scope is jointly resolved by the law and finance ministries as well as the AGP.

The three sides met where the law secretary opined that AGP should define the term ‘audit’ and what kind of documents its teams require from other institutions of the government and offices during their audit and the same definition should apply everywhere. The matter remained unresolved.

The finance ministry sent a formal reference to the Law Division to explain and clarify the “extent and nature of the audit of AGP”.

The law ministry concluded in writing that Article 170(2) of the Constitution says that if there were no other guidelines or legal regime in place to determine the nature and scope of the audit, then the determination made by the AGP for conducting audit of others can be followed to audit its offices as well.

“There is a concept of pari materia in law, under which a law in a similar case can be benefitted from. Therefore, when the nature and scope of audit has to be determined by the auditor as per the Constitution and the AGP Ordinance 2001, the same principle has to be adopted for the audit of AGP offices,” it noted.

The law ministry also wrote that all documents asked by the external auditor which are within the parameters of Section 19A of the 2001 ordinance have to be provided by the AGP office because the words used in that section are “all books and other documents and such information as he may require for the purpose of audit”.

On top of that, the law ministry also said the office of AGP was “part of the federal government and the government cannot be presumed to be someone who violates law and in case this violation is committed, action under relevant efficiency and discipline rules can be taken by the competent authority”.

“Entrusting the audit of the AGP to the executive branch of the government i.e. Finance Division is an infringement upon the independence of institution of the AGP envisaged in UN General Assembly resolution 66/209, and International Standards of Supreme Audit Institutions (ISSAI),” a top officer of the AGP told Dawn.

He said Section 19-A was inserted in the Auditor General’s Act 2001 through Finance Act 2015 and required the audit of the sanctions accorded by the AGP by an independent officer appointed by the president.

He said the insertion of Section 19-A in the 2001 ordinance through Finance Act 2015 was itself violative of the provisions of Article 70 and 73(2) of the Constitution.

He explained that the Auditor-General’s (Functions, Powers and Terms and Conditions of Service) Ordinance 2001 was not a money matter and amendment also could not be made through the Finance Act.

It is an established principle of ethics for auditors that an audit professional in public practice, who provides an assurance service, must be independent of the assurance client and Section 19A “amounted to demolishing Constitutional scheme of the independence of Auditor General for accountability of executive for use of public resources”.

The officer said the AGP was an important part of the accountability chain in the country but it was also not a sacred cow. However, there should be some independent body to audit the accounts of AGP. Such an independent body “should not be part of the executive branch so as to avoid any conflict of interest”.

In the National Audit Office (NAO), UK and Government Accountability Office (GAO), US, chartered accountant firms audit the supreme audit institutions and such a system can also be implemented in Pakistan.

Published in Dawn, August 24th, 2020