Finance Ministry distributes Rs240 million honoraria without cabinet approval

The finance ministry has been found distributing Rs240 million as honoraria among its officials without an approved cabinet policy and in violation of rules, according to a report by the Auditor General of Pakistan. 

According to a news report the Finance Division incurred an expenditure of Rs240,167,079 on honoraria, up to four basic pays, during the financial year 2022-23. The honoraria were also excluded from salaries to evade income tax. The Auditor General recommended recovering the excess amount paid.

The audit found that the Finance Division’s payment of honoraria violated several regulations: it lacked cabinet approval, used a DDO vendor number instead of crossed cheques or salary slips, and reduced tax liability by excluding the payments from salaries.

Honorarium is defined as a payment granted to a government servant for special work of an occasional or intermittent character, but not for work within their normal duties. 

The Finance Division explained that honoraria totaling Rs240,025,940 were granted on three occasions in the financial year 2022-23: Rs220,860 in August 2022 through pay slips for leftover employees, Rs947,161 in May 2023 through pay slips granted by the outgoing Finance Secretary, and Rs238,857,919 for budget honoraria up to four months’ basic pay as approved by the Finance Minister as Chairman of the Economic Coordination Committee (ECC).

The division added that the Financial Management and Powers of Principal Accounting Officers Regulations, 2021, allowed for honoraria payments and that a policy was submitted and approved by the ECC in June 2022. 

Due to timing issues, honoraria could not be processed through the regular payroll system, resulting in cash payments approved by the Accountant General Pakistan Revenues (AGPR) with a tax deduction of up to 10%.

However, the audit noted that the management’s reply was unacceptable as the payments were made without cabinet policy approval, and the ECC’s decision did not mandate future honoraria. The audit recommended recovering the excess payments and formulating an approved policy in line with the prime minister’s decision.