Rs5.5 billion foul play in defence funds

ISLAMABAD – The Auditor General of Pakistan has unearthed financial foul play of billions of rupees in spending of funds in Pakistan’s defence sector.
The audit report on the accounts of defence services for the fiscal year 2011-12 finds that Pakistan’s defence organisations misused funds or violated prescribed rules during spending of funds exceeding 5490.961 million rupees.
The break-up of this amount suggests that the funds irregularities were recorded highest at Pakistan Army that saw the questionable use of Rs2318.222 million. The embezzlements at the Ministry of Defence Production, mostly involving Heavy Industries Taxila (HIT), were counted at over Rs1323.551 million.
The Military Lands and Cantonments had irregular funds spending up to Rs927.926 million. The misuse or embezzlement of financial resources at Pakistan Air Force (PAF) was calculated at Rs572.208 million. The Military Accountant General (MAG) had irregularities exceeding Rs341.668 million that also involve HIT’s dubious role in making controversial payments to its clients.
The report recommends that the pointed out fraud/embezzlement cases need to be investigated to fix responsibility in each case and appropriate action should be taken against those held responsible.
It points to weaknesses in the armed forces internal (financial) control mechanism and reveals that the diversion of public receipts to non-public funds too has not been stopped despite having been pointed out in every audit report and issuance of instructions by the Public Accounts Committee (PAC) to stop this practice.
The report says that the telecommunication companies were paying the rent for the towers installed in the cantonment areas to the military authorities instead of depositing the same in the government treasury.
Pointing to some major violations of rules at Pakistan Army, the report says, Rs842.300 million were irregularly spent out of which an unjustified payment of Rs752.428 million was made to National Logistics Cell (NLC) for a project in Bagh, Azad Jammu and Kashmir, for the ‘work’ that was never carried out at all. On the same pattern, other unauthorised payments amounting to Rs34.050 million were also made to the NLC.
In addition, Rs1219.300 million were yet to be recovered by the Pakistan Army from the cultivators who have crops in the military’s lands in Okara but are not paying the rent. During the audit of the Joint Services Headquarters at Chaklala, the audit team had asked the military authorities to produce the record of expenditure of Rs93.053 million which was never provided, according to the report.
The audit report cited official rules that do not allow the HIT (Heavy Industries Taxila) to spend more than one percent of its earnings on the employees’ welfare. In stark violation of rules, the HIT spent an amount of over Rs10 million for the ‘welfare’ of its officials despite not been authorised to. The report revealed that the HIT had a saving account containing over $170 million at the National Bank of Pakistan (NBP) New York branch and another saving account at NBP Taxila branch containing nearly Rs471 million. Under existing rules, the HIT is not allowed to open a saving but a current account only. The HIT did not get the government’s approval before opening saving accounts on which it was earning interest in millions. It is not clear as to where the HIT spends this huge amount of money.
Unearthing irregularities in the procurement process at the HIT, the audit report mentions that the HIT had procured 1,000 tonnes of Silica sand but consumed only 25 tonnes of it. “It indicated that the stores were procured without real necessity and just to consume the available budget,” the report stated.
Another financial irregularity reveals that the HIT spent around four million rupees only in purchasing ‘souvenirs’ for foreign dignitaries and the VIPs. Also, the HIT had paid over Rs1.1 million to a private guesthouse in Taxila where some Ukrainian experts had stayed. The payments were made to the personal account of the guesthouse manager under dubious circumstances instead of the motel’s official account while the rules did not allow so and the foreign experts were not required to stay outside the HIT premises due to security concerns.
Some major cases at PAF are: Embezzlement of Rs422.714 million through awarding dubious contracts, irregular expenditure of Rs20.487 million and non-submission of over Rs20 million to the government treasury the PAF had earned from the cellular companies. The said amount is part of the Rs 127.516 million the PAF officials had embezzled through diversion of public receipts.
Due to improper management of military lands and cantonments, the national exchequer suffered a loss of Rs768.734 million. The audit report finds massive irregularities at the Cantonment Boards of Abbottabad, Gujranwala, Sialkot and several other cities. Imposition of excessive charges on the residents in the names of taxes as well as unauthorised allotments were found to be frequent practices at the Cantonment Board Abbottabad whose station commander failed to satisfy the audit team by offering a valid explanation in this regard.
The team of auditors also detected a suspected fraud of Rs23.584 million at Controller Military Accounts (CMA) Peshawar where 53 paid cash vouchers of the said amount were missing from the record.
Following the audit objections, the Departmental Accounts Committee directed the Ministry of Defence to issue instructions to the services chiefs and the Joint Services Headquarters to follow Public Procurement Regulatory Authority (PPRA) rules 2004 and amend the existing rules which are inconsistent with the PPRA regulations.

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