Centre continues Rs87.87 billion annual deduction under NFC award without AGP certification: report

The federal government has been deducting Rs87.871 billion annually for collection charges on a notional basis without the required certification from the Auditor-General of Pakistan (AGP), according to the Audit Report on the federal government’s accounts for the fiscal year 2024-25. This deduction continues despite the passage of over 15 years since the enactment of the 7th National Finance Commission (NFC) Award,  Business Recorder reported. 

The Audit Report highlights that, as per Clause 2(a) of the Distribution of Revenues and Grants-in-Aid Order, 2010, the net proceeds for any tax, duty, or levy should be reduced by the cost of collection, which must be ascertained and certified by the AGP. 

However, the Finance Division has been deducting one percent, amounting to Rs87.871 billion, from the divisible pool of taxes in the fiscal year 2023-24 without having the certification from the AGP.

The report noted that this issue of uncertified deductions has persisted since the implementation of the NFC Award in 2010. Despite being flagged by audits in previous years, the Finance Division has not obtained the required certification from the AGP. A senior official within the Ministry of Finance admitted that the Public Accounts Committee (PAC) has yet to take decisive action to address the issue.

The Finance Division has stated that the deduction was made following the recommendation of the 7th NFC Award, and that the accounts will be submitted to the AGP for certification. However, the auditors have rejected this response, emphasising that the deduction should only be made after the AGP determines and certifies the collection charges.

The audit report flagged the deduction as irregular, noting that no certified breakdown or approval from the AGP had been provided for verification. The Audit also pointed out that the lack of certification had been an ongoing issue despite repeated observations in past audit cycles.

The Departmental Accounts Committee (DAC) meeting held on January 13, 2025, directed the Finance Division to resolve the matter with the AGP. The Audit recommended that the Finance Division comply with the requirements of the Distribution of Revenues and Grants-in-Aid Order, 2010, and provide the necessary records for verification of the collection charges.