How to Improve Financial Accountability in Pakistan

Pakmon
Posted by Muhammad Akram Khan[1]

Public financial management (PFM) arrangements in Pakistan perpetuate a system that the colonial rulers designed for effective control of taxes collected from the local populace. Globally, PFM concepts and practices have changed significantly since then, but very little in Pakistan. They fail to recognize that public managers should be accountable for the resources they manage, or that the PFM systems should generate reliable financial and performance information besides exercising robust internal controls.

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.

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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