Expenditure from public exchequer not exempted from audit: SC

The Supreme Court on Tuesday said expenditure from public exchequers must be audited by the Auditor General of Pakistan (AGP) without any exception.

This was stated in a detailed judgment in media commission case that was announced by a three-judge bench led by Justice Jawwad S Khawaja and comprising Justice Khilji Arif Hussain and Justice Ejaz Afzal Khan.

The order also declared Rule 37(5) of General Financial Rules (GFR) of the Federal Government unconstitutional.

“This rule had up till now been used to shelter Secret Services Funds from independent audit by the AGP – funds which existed in the budget of no less than 27 ministries FY 2012-13 and amounted to more than Rs 3.57 billion,” said the 22-page detailed judgment.

The court had clarified that after the 18th Amendment, on account of Article 170(2), the AGP enjoyed a strong constitutional mandate to audit all public spending without exception.

“Funds which had been declared as secret either by an executive order or ordinary legislation do not fall outside this purview”.

“Furthermore, autonomous public bodies which do not receive any government funding but were established by the government or under its control were also not beyond the AGP’s power to audit,” the judgment declared.

The apex court had clarified that the AGP was allowed, in fact obliged, to exercise oversight over accounting procedures adopted by the government.

Article 170(1) of the Constitution and Section 5(1) of the Controller General of Accounts (Appointment, Functions and Powers) Ordinance, 2001 made this amply clear.

The AGP should therefore examine the adequacy of the accounting system prescribed for Secret Service Funds, under Rule 37(1) to (4) of the GFR, the order added.

It said it may be mentioned by way of background “that the method prescribed by these rules is extremely sketchy, relying entirely on the good faith of the users of these funds”.

“This system is clearly open to abuse. If the AGP, after independent assessment, finds the mechanism below par, the government would be obliged to substitute it with a more transparent one,” the court said.

It had also clarified that under Article 171, the AGP’s reports must be shared with the president, governor, the parliament and the provincial assemblies.

Citing the famous incident of Hazrat Umar being held to account for his two pieces of cloth, Justice Khawaja emphasised that it was through such levels of financial probity and public accountability that the government exercising authority in the name of the people derived legitimacy.

The judgment also cited the example of countries all over the world, including the UK, France, Germany and even the security state of Israel, who had gradually moved towards more rigorous standards in public accounting and audit.

Nonetheless, the judgment also acknowledged that there might be exceptional circumstances where certain audit information would need to be kept outside the public purview.

“If such exceptions were to be claimed, they must claim through legislation and not in an arbitrary manner. Furthermore, such legislation would be subject to judicial review to ensure compliance with constitutional requirements,” the judgment added.