The accounts of Pakistan's armed forces show "massive financial irregularities" totalling Rs56.5 billion ($660 million), according to the 2011 annual report of the Auditor General of Pakistan.
The report says irregularities occurred due to negligence, ineffective internal controls, embezzlement and misuse of authority by officers of the armed forces.
Around 330 contract agreements were concluded from 2008 to 2010 without following the procedure laid down in the Public Procurement Rules 2004, the auditors observed.
When they pointed out irregularities, the executive stated that the ministry's instructions were only received in June 2010. The auditors said that the reply is not tenable.
Auditors found that the Pakistan Army blocked Rs3 billion in funds due to unnecessary procurement and inappropriate storage of 1,385 new vehicles at the Central Ordnance Depot in Karachi. The vehicles have not been used for the last three years.
The report discovered excess transfer of funds to the Frontier Works Organisation (FWO) for procurement of bullet-proof jackets. Out of the Rs424.2 million allocated for them, the FWO has to refund some Rs385 million in addition to the loss it incurred on account of risk and expense contracts after the supplier, Musterhaft Pvt Ltd, failed to provide more than 1,000 jackets.
Money spent on building material for renovation is unaccounted for and amounts to Rs52.7 million in Kharian, Sialkot and Lahore cantonments. The auditors say there was no proof that repair work was carried out. Irregularities in purchase of pre-fabricated accommodation for UN missions amounted to Rs92 million while another Rs14.6 million was erroneously paid over as General Sales Tax, which needs to be recovered from the supplier.
Irregularities totalling Rs6 billion surfaced in the Pakistan Aeronautical Complex at Kamra while the Pakistan Air Force (PAF) lost Rs102 million due to non-recovery of five per cent rent on flying allowance from General Duty Pilots over the past 20 years. Auditors asked for the paperwork but it was refused and they observed that this amounts to blatant disobedience and ineffectual administration. Failure to deposit rent in the government treasury caused a loss of Rs14.6 million by the PAF Academy, Risalpur.
The navy failed to transfer 50 per cent accommodation charges paid by foreign trainees to the government treasury, resulting in the loss of $65,516. Auditors also observed that Rs6 million incurred on excess issue of food items in PNS Bahadur and PNS Mehran for the year 2009-10 needs to be reimbursed. An amount of Rs76 million has still not been recovered after unauthorised payments to re-employed officers of the Pakistan Navy in 2009-10 were unearthed.
Military Lands and Cantonment inflicted a loss of Rs181 million to the cantonment fund due to irregularities in awarding leases. The Cantonment Board in Lahore lost Rs30 million due to its failure to revise the tax rate on immovable property. Fraud and embezzlement caused a loss of Rs68 million to the Cantonment Board in Rawalpindi in 2008. Failure to recover Rs97 million in dues added to the losses incurred by various boards.