News
Wednesday, July 17, 2013
SC rules audit of secret funds* Court declares Rule 37(5) of the General Financial Rules illegal and unconstitutional
By Hasnaat Malik
ISLAMABAD: Declaring Rule 37(5) of the General Financial Rules (GFR) as illegal and unconstitutional, which until now has been used to shelter secrete services funds from independent audit by the Auditor General of Pakistan (AGP), the Supreme Court has said that all expenditure from the public exchequer must be made in a transparent manner and each rupee of such expenditure must be audited by the AGP, to ensure compliance with law.
The secret funds existed in the budget for financial years 2012-13 in about 27 ministries and amounted to more than Rs 3.57 billion. The 20-page order, authored by Justice Jawwad S Khawaja, in constitutional petitions filed by journalists Hamid Mir and Absar Alam, has clarified that after the 18th Amendment, on account of Article 170(2), the AGP enjoys a strong constitutional mandate to audit all public spending without exception.
The funds which have 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 are established by the government or are under its control, are also not beyond the AGP’s duty and power to audit. The court further clarified that the AGP is 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 make 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. 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 has also clarified that under Article 171 the AGP’s reports must be shared with the president, governor, parliament and the provincial assemblies.
The report said that the auditor general shall prescribe procedures that permit audit of accounts labelled as “secret” but do not compromise the secrecy of such accounts. The auditor general shall have four months to establish such procedures, says the verdict. Justice Khawaja has highlighted that accountability of those who hold high office in government represents “the very foundation for the levy and legitimacy of taxes etc.” Citing the famous incident of Hazrat Umar (RA) being held to account for his two pieces of cloth, Justice Khawaja emphasises that “[i]t is through such levels of financial probity and pubic accountability that governments exercising authority in the name of the people, derive legitimacy.”
The judgement also cited the example of countries all over the world, including the UK, France, Germany and even the security state of Israel, who have gradually moved towards more rigorous standards in public accounting and audit.
Courtesy www.dailytimes.com.pk