Audit report finds massive “embezzlement of public money” in defence sector

The Auditor General of Pakistan revealed major financial irregularities in the defence sector, including a lack of transparency in procurement processes, unauthorised spending, and inadequate financial records, leading to losses for the national treasury.

The AGP report, based on 300 pages, examined expenditures totaling Rs566.29 billion. This included Rs335.63 billion from the second phase of the 2022-23 audit and Rs230.66 billion from the first phase of the 2023-24 audit.

The report pointed out “misappropriation and embezzlement of public money and fictitious payments”  and 32 other instances of financial mismanagement.

“Audit identified the non-compliance to the Defence Services Regulations in areas like advance payments before completion of works through Running Account Receipts (RARs), splitting of financial powers, non-recovery of rent and allied charges, non-deduction of applicable taxes, violation of public procurement rules, non-compliance of A-1 land policy and execution of unauthorised work as some of the key issues,” the report said.

The report highlighted the longstanding failure of the defence authorities to address audit irregularities over the past four decades.

“The Ministry of Defence complied with 659 directives of the Public Accounts Committee (PAC) of the parliament out of 1974, which indicates that compliance of PAC directives is very slow. The principal accounting officer should take necessary steps to expedite compliance with PAC directives.”

The findings revealed that army sectors violated established rules by awarding contractor jobs and procurement bidding to preferred bidders without publicly advertising these opportunities.

Even in cases where procurements were deemed "secret" for security purposes, approval was not obtained from the defence secretary, who authorise such sensitive undertakings.

The report highlighted numerous instances where procurement regulations were breached as contracts for various purposes were established without formal agreements with contractors.

Furthermore, the purchase orders were offered at three times the higher price, disregarding the competitive bidding process.

According to established procedures, all consignee departments are subject to rigorous inspections and quality checks. 

However, the audit uncovered instances where cash receipt vouchers (CRVs) were issued without items being received and super check certificates issued without proper verification.

In light of these serious irregularities, the Departmental Audit Committee (DAC) recommended a fact-finding inquiry by the relevant authorities. However, the defence authorities failed to comply with this directive.