The federal government is likely to 'oust' chartered accountant firms from audit of public sector projects, arguing that it is a waste of public money and in conflict with constitutional obligations of the Auditor General of Pakistan (AGP), sources close to Deputy Chairman Planning Commission told Business Recorder here on Monday.
The Executive Committee of the National Economic Council (Ecnec) in its meeting on January 21, 2010 had also directed that all projects costing over one billion rupees must be audited by audit firms of repute. An informal audit was to be conducted every six months and formal audit every year to ensure (i) transparency (ii) timely execution of projects and (iii) ensure financial propriety.
State Bank of Pakistan (SBP) had been directed to maintain a list of reputed auditors. After discussions, Ecnec decided that Planning Commission should bring a position paper in consultation with all stakeholders in the next meeting of Ecnec. Accordingly, all provincial governments including governments of AJ&K, Gilgit Baltistan and Federal Ministries/Divisions were requested to furnish their views on the issue to the Planning and Development Division.
According to sources, the majority of the stakeholders argued that under the prevailing rules, the office of the AGP is responsible to ensure transparency, timely execution of the projects and financial propriety of PSDP funded projects. The office of the Auditor General of Pakistan, presently dealing with audit of PSDP funded projects, made the following recommendations: (i) the experience and capacity of the chartered accountant firms to conduct performance/programme audit of public sector projects in terms of knowledge of the regulatory framework may be limited.
The knowledge of the rules and regulations as well as that of performance auditing techniques is critical for conducting such audits; (ii) the performance audit of the public sector projects/ programmes falls under the purview of the office of AGP which has attained advanced capacity for such audits and developed specific methodologies and guidelines for performance auditing of various sectors. Internationally, the Supreme Audit Institutions (SAIs) alone are generally entrusted with the performance/ program audits of public sector projects. In Pakistan, the department of the AGP has trained over 1000 local officers and over 100 officers of the other SAIs in this specific field; and (iii) chartered accountants focus on financial analysis is only one of the many aspects covered under performance auditing.
The Planning and Development Division has examined the stakeholders' observations which summarily pin point following issues: (i) according to rules of business, audit of the public sector projects is the responsibility of the AGP. The involvement of private chartered accountants in audit is legally possible after change in rules of business; (ii) no provision of funds to meet the audit (twice a year) by private audit firms is available in the approved PC-Is of on-going projects, hence this will cause revision as well as enhancement in costs of these projects; (iii) informal audit after every six months and formal audit after every year would amount to subletting the responsibilities of the executing and implementing agencies.
This will also absolve these agencies of their own responsibilities, accountability and professional obligations besides providing for opening of corrupt practices; (iv) the engaging of private firms for informal and formal audit of these mega developments projects involving substantial public fund expenditure will clash with the constitutional obligations of the AGP besides such audits will have no legal standing. Moreover, such private audit will have contrary and adverse effects on the transparency, good governance, financial propriety and responsibility of concern organisations/departments/ministry. Ministry of Defence maintains that the services of AGP may be used for the performance audit of public funded project rather than sharing of sensitive information with the private sector.
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