PFM practices currently applied in Pakistan have three major weaknesses. First, though line ministries can make routine expenditures, they require approval of the Ministry of Finance (MoF) for re-appropriations and many non-routine expenses. Second, line ministries have no role in the making of payments and the preparation of accounts. Third, ministries do not report systematically on their financial and operational performance. Consequently, managers have little incentive to improve efficiency in service delivery and have diluted accountability for the management of resources.
The Auditor General of Pakistan (AGP) has a vast mandate but faces severe resource constraints. Thus, it cannot focus on issues of national significance such as the energy crisis, the anti-terrorism program, effective management of water resources and waste, the efficient procurement of oil, air planes and defense equipment, and other pressing policy issues.
Proposed accountability framework
The existing accountability framework cannot hold all public managers accountable on a timely basis. Here are some key elements of a modified accountability framework that could be implemented over a period of years with enormous benefits for efficient financial management.
- The MoF should hand over most responsibilities for the control of expenditure to line ministries. Heads of divisions, known as Principal Accounting Officers, should manage their budgets, make payments and maintain accounts independently. The MoF should be mainly responsible for preparing budgets and cash forecasts and arranging funds for the spending agencies.
- Line ministries, operating as independent payment and accounting units, should hold bank accounts with the central bank and submit their cash requirements to the MoF each month, after considering their operational plans and approved budgets. Staff working in the government’s many accounting offices should be transferred to line ministries for managing payments and accounts. Ministries should report on their performance against predetermined indicators.
- The Parliament should consider creating a Performance Measurement Commission (PMC) for approving performance indicators, data collection procedures, and formats of performance measurement reports of line ministries as well as provinces and districts.
- The role of the Controller General of Accounts should be limited to preparing and consolidating the government’s financial statements and managing pension, provident and other public funds. Most staff currently working for the Accountant General should be transferred to the newly-established accounting units in line ministries.
- The Parliament should create an office of Chief Internal Auditor under the Prime Minister. This office should take over the function of compliance auditing currently performed by the Auditor General. Provincial legislatures should create a similar system at provincial and district levels. The Chief Internal Auditor should submit audit reports to the Parliament for consideration by the relevant Public Accounts Committees (PACs).
- At all levels of government, there should be about 4-5 PACs, each with 3-5 members, as against the existing single PAC of 20 members in the federation and similar numbers at the provincial level. At the federal level, for example, each PAC would focus on, say, 7-10 line ministries, and examine reports issued both by the Auditor General as well as the Chief Internal Auditor.
- The Auditor General should be the auditor of the federation only, with similar offices being established at the provincial level. At district level, a new office known as the District Audit Authority should be established. These bodies would be responsible for the certification of financial statements and performance measurement reports of line ministries and districts. The existing methodology and guidelines for performance audit would need to be modified.
Conclusion
The proposed accountability framework would enhance accountability at all levels. Line ministries, departments and districts would have full authority for budget management with improved accountability for results. The new framework would encourage managers to generate information on their performance. The Auditors General would have more resources and capacity to undertake performance audits as well as their routine financial audits. Auditing at district level would be strengthened by establishing independent audit offices. The PACs would be able to review audit reports in a shorter span of time.
The new framework would require fundamental changes in the Constitution and laws at all levels of government. Senior politicians would be required to exercise strong leadership. Rules of business in federal and provincial governments would also require substantial changes, together with a huge effort to develop new technical and managerial skills and capacities, and IT systems. It would take a period of at least 3-5 years to implement the new framework which, however, could be broken down into a series of smaller steps. Development partners could be invited to provide financial and technical support for the new systems.
[1] Formerly Deputy Auditor General, Pakistan, Additional Secretary, Economic Affairs Division, Pakistan, and Chief Resident Auditor of United Nations Peacekeeping Missions.
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