Pensioners in Pain

By Dr M Ali Hamza | November 2020

According to a news report, mismanagement and malpractices in the office of the Accountant General Pakistan Revenues (AGPR) are causing a loss of up to Rs175 billion per annum to the national exchequer.

Public sector accounting has become an important global topic in recent years. The effect of such accounting on public financial management and accountability has significantly influenced socio-economic development in Pakistan. An effective accounting system allows the government to manage its finances smoothly and provides audit trails to avert and detect financial misconduct. The department of the Accountant General of Pakistan Revenues (also known as the AGPR) is responsible for the centralized accounting and reporting of federal transactions, whereas its sub-offices are responsible for provincial transactions.

The AGPR is an important institution that makes payments for all public sector procurements; it may be noted that public sector purchases are significantly costlier than similar procurements made in the private sector. The disclosure by the federal information minister Shibli Faraz is shocking that federal government spends approximately around Rs1 trillion every year for procurement purposes and Rs150bn to Rs175bn is paid at above market rates in these purchases. This means that during the past 10 years, the national exchequer suffered around Rs4 trillion in losses mainly due to malpractices and corruption in the AGPR.

The burden of this corruption is borne by the whole nation in terms of higher taxes and additional loans. The issues of malpractices at the AGPR are not raised. In 2015, a question mark on the country’s bill-clearance system was raised in the Senate Standing Committee on Finance and it was pointed out that out of 347,405 bills submitted in the AGPR during the previous fiscal year, 27%, were rejected for various reasons. On insistence of the committee members, the AGPR chief listed corrupt practices, improper sanctioning authority and lack of budget as top reasons for the high rate of rejection or delays.

It is an open secret that no bill in the AGPR gets approval without ‘speed money’ and the best way is to delay or reject payments by imposing unnecessary objections. This corruption is not limited to clearance of bills alone. They even fleece payments to government employees who have to go to the AGPR for various official payments like pensions, leave encashment, etc. The plight of the pensioners is particularly deplorable in this respect. It is pertinent to mention here that the AGPR officials have developed a system of imposing a ‘cut’, ranging between 2% and 5% of the total billed amount, and tend to treat it as a deserved payment and their genuine income. Many current and ex-senators have repeatedly stated Pakistan is a country where bills of official civil works are prepared by adding 16% kickbacks. If such bills are to be disbursed among officials of the executing departments, how can corruption be tackled?

This underlines the fact that the AGPR pays more for similar purchases in the private sector and if there are no payments made ‘under the table’ then bills are delayed or rejected.

Since independence, Pakistan has implemented the British accounting system. The IMF conducted a survey for reforms through a diagnostic study sponsored by the World Bank (WB) and project partner Asian Development Bank (ADB) which pointed out that accounting and auditing system of all government entities of Pakistan were obsolete and required harmonization. It said that an inadequate system for financial data and lack of skilled staff resulted in ineffective internal controls. Thus, to overhaul the accounting system in Pakistan and to harmonize it with the global financial governance system, civil and public sector PIFRA (Project to Improve Financial Reporting and Auditing) reforms commenced in the 1990s. These were initiated in 1997 and were financed by the World Bank under the supervision of the Accountant General of Pakistan.

Pakistan’s Federal Investigation Agency has been tasked many times to check the assets of certain officials in the AGPR as they are openly known to be corrupt. Some updates were made when the AGPR purchased an electronic operational system some 16 years back and a bill tracking system was launched in 2015 but the implementation of these systems is in a shambles. Bringing in new automated systems could be a help but the human brain behind those machines needs some fixing.

The AGPR’s internal monitoring system must be re-launched with new recruits, which is a sensitive task. The Federal Investigation Authority must be made responsible for weeding out the corrupt elements in the AGPR. People in the AGPR who are openly known to be corrupt must be taken to task after evaluating the details of their assets. It is the job of the FIA to undertake operations against infringements and other crimes in public institutions. This can surely lead to better conditions prevailing in the AGPR.

An important question is that whether there is an institution to monitor the FIA? The electronic operational system that was purchased 16 years back needs to be implemented. To generate pendency reports, a well-equipped bill tracking system was launched in 2015. What is needed now is its adequate execution. The auditing team has to occasionally visit the market and match the quoted prices with those in the market. If a significant gap is found in prices, the procurement officer must be penalized. If this anomaly is overlooked, the AGPR monitoring team must come into action. It is sad that instead of playing its watchdog role, the AGPR is itself a beehive of corruption.

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Pensioners in Pain

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