Pakistan audit reports expose massive financial irregularities

ISLAMABAD: Pakistan’s key economic institutions are facing intensified scrutiny after two major audit reports uncovered widespread financial irregularities and massive revenue shortfalls, raising serious concerns over governance, compliance, and accountability in the public sector.

The findings involve the Trade Development Authority of Pakistan (TDAP) and the Federal Board of Revenue (FBR), collectively revealing irregularities and tax losses worth tens of billions of rupees.

The Trade Development Authority of Pakistan, the country’s main export promotion body, has come under sharp criticism following an audit report for the financial year 2024–25 that identified irregularities totaling Rs 3.656 billion.

The report highlights systemic failures in financial management, internal controls, procurement procedures, and statutory compliance, raising questions about the organization’s effectiveness and oversight mechanisms.

According to auditors, the irregularities include:

• Rs 1.6 billion in recovery-related issues
• Rs 1.36 billion in internal control weaknesses
• Over Rs 513 million linked to mismanaged bank accounts

The audit report found that TDAP failed to prepare mandatory financial statements, including balance sheets, income statements, and cash flow statements, as required under the TDAP Act, 2013.

Auditors rejected management’s explanation that external auditors were involved in preparing accounts, stating that the justification was insufficient and reflected weak financial discipline.

A major concern was the retention of Rs 513.6 million generated from Karachi Expo Centre operations in a commercial bank account instead of being deposited into the official TDAP Fund, as legally required.

Read more: Audit report reveals PIA failed to recover over Rs20 billion dues

Although a portion of the funds was used for operational expenses such as maintenance, utilities, and security, auditors termed the practice a violation of financial rules and a risk to transparency.

The audit also identified:

• Rs 29.5 million in revenue losses due to uncharged additional setup and dismantling days at Karachi Expo Centre
• Rs 24.1 million in unpaid liabilities to the Karachi Water and Sewerage Board

One case highlighted the Defence Export Promotion Organization (DEPO), which exceeded permitted usage days without being charged the required fees, resulting in avoidable financial loss.

Irregular procurement activities worth over Rs 144 million were also reported, including alleged violations of competitive bidding rules and inadequate documentation.

Auditors further noted recurring weaknesses in internal controls, poor record-keeping, and failure to properly reconcile transactions, increasing the risk of financial mismanagement.

The report also criticized TDAP’s lack of compliance with Public Accounts Committee (PAC) directives, noting that most previous audit observations remain unresolved.

In a separate but equally alarming development, the Auditor General of Pakistan has identified a Rs 45.388 billion shortfall in withholding taxes due to widespread non-compliance by withholding agents under the Federal Board of Revenue (FBR).

The audit found that 1,344 withholding agents operating across 19 field formations failed to deduct or deposit taxes on payments made to suppliers, contractors, and service providers during fiscal years 2022–23 and 2023–24.

Under Sections 153 and 161 of the Income Tax Ordinance, 2001, withholding agents are legally required to deduct tax at source. Failure to comply makes them personally liable for unpaid taxes.

The audit report, communicated to relevant authorities between February and November 2024, highlights serious enforcement gaps within Pakistan’s tax collection system.

Officials warned that continued non-compliance poses a significant risk to national revenue, especially at a time when Pakistan is under pressure to strengthen its fiscal position.

Together, the two audit findings paint a broader picture of structural weaknesses in Pakistan’s financial governance framework.

From export promotion to tax collection, the reports point to recurring issues of weak oversight, inadequate enforcement, and lack of accountability raising urgent calls for institutional reform and stricter financial controls across key government bodies.