The Auditor General of Pakistan (AGP) has uncovered significant financial irregularities, non-transparent procurements, and unauthorized expenditures across various defense services units. The AGP has urged the relevant authorities to enhance internal controls and initiate inquiries to hold those responsible accountable.
In its 2023-24 audit report on Defense Services accounts, the AGP documented over 300 pages of audit objections, highlighting issues such as uncollected revenues, improper payments, procurement irregularities, state losses, and missing records.
The report noted that the Ministry of Defence operates under a single-line budgetary grant, allocated among the Ministry of Defence Production, Services Headquarters, Inter-Services Organizations, and the Strategic Planning Division. The primary role of the armed forces—the Army, Navy, and Air Force—is to protect the country’s territorial integrity and assist civil administration when needed.
The audit scrutinized expenditures totaling Rs566.29 billion, covering Rs335.63 billion in the second phase of the 2022-23 audit and Rs230.66 billion in the first phase of the 2023-24 audit.
Key issues identified by the audit included non-compliance with Defence Services Regulations, such as advance payments before work completion through Running Account Receipts (RARs), misuse of financial powers, uncollected rent and charges, failure to deduct applicable taxes, violations of public procurement rules, non-compliance with A-1 land policy, and unauthorized work execution.
The report also highlighted that the Defence Services were initially allocated Rs1.563 trillion for the 2022-23 fiscal year, which was later increased to Rs1.592 trillion through supplementary grants. The AGP expressed concern over the poor compliance rate of defense formations with audit objections over the past 40 years, noting that efforts to correct and regularize accounts have been insufficient.
Since 1985, the Ministry of Defence has complied with only 659 out of 1,974 directives issued by the Public Accounts Committee (PAC) of the parliament, indicating a slow compliance rate. The report urged the principal accounting officer to take necessary steps to expedite compliance with PAC directives.
The Ministry of Defence Production fared no better, complying with only 109 out of 372 PAC directives.
The AGP report pointed out that in certain Army formations, procurements were made in violation of relevant rules, with contracts split and awarded to favored contractors or suppliers on the same day to avoid transparent bidding.
In some instances, management claimed that advertisements were placed on the Public Procurement Regulatory Authority (PPRA) website but skipped newspaper ads due to the “secret nature” of defense work. However, the audit noted that exemptions from procurement rules, which must be granted by the defense secretary, were neither sought nor documented.
The Departmental Audit Committee (DAC), which includes auditors and relevant authorities under the federal secretary’s oversight, recommended conducting inquiries to assign responsibility and regularize expenditures. However, these directives had not been implemented by the time the annual audit report was published.
According to procurement regulations, all procurements exceeding Rs500,000 must be advertised on the PPRA website. However, audits of Army formations for the financial years 2021-22 and 2022-23 revealed several violations of these rules.
In one case, management defended its actions by stating that procurement was based on a comparative statement (CST) from a depot, but no documentary evidence of CST approval was provided. The audit also found that orders were issued to different contractors at the same rate, suggesting favoritism.
Another case involved an Army School where funds were spent on renovating a Foreign Trainees Mess Shed and procuring stores without formal contract agreements or estimates. The work was done without the necessary approvals from Military Engineering Services (MES), rendering the expenditure irregular.
Additionally, the audit found that in one Army formation, purchase orders were issued to contractors at rates nearly three times higher than the lowest bid, bypassing the competitive bidding process.
Finally, the Directorate General Procurement Army rules require a 100 percent check at each consignee department, with a 5 percent super check by the competent authority. However, the audit revealed that cash receipt vouchers (CRVs) were issued without receiving items, and 5 percent super check certificates were also issued.
