Audit report 2025-26: AGP detects financial mismanagement in water ministry

ISLAMABAD: The Auditor General of Pakistan (AGP) has uncovered extensive financial mismanagement, weak governance, and deep-rooted inefficiencies within the Ministry of Water Resources (MoWR) and its attached entities, warning that systemic flaws in planning, execution, and oversight are undermining the country’s water and energy security.

According to the Audit Report for 2025–26, the Directorate General Audit, Water Resources, identified widespread irregularities in contract management, procurement practices, financial discipline, and project planning. The audit, based on scrutiny of financial year 2024–25 accounts, pointed out recoveries of more than Rs7.02 billion, indicating serious financial lapses that require urgent corrective measures.

The report presents a troubling picture of institutional weaknesses across major organisations, including the Water and Power Development Authority (WAPDA), Indus River System Authority (IRSA), Federal Flood Commission (FFC), Pakistan Commissioner for Indus Waters (PCIW), and Pakistan Council of Research in Water Resources (PCRWR). These entities collectively handled expenditures of Rs359.6 billion and receipts of Rs194.3 billion, a substantial portion of which was examined during the audit process.

One of the most critical observations made by the AGP is that several development projects were initiated without proper feasibility studies, planning, or detailed design. This lack of groundwork has resulted in serious complications during execution, including delays, cost escalations, and disputes.

Audit findings reveal that many projects stalled at early stages due to unresolved land acquisition issues, reflecting poor pre-project planning. Furthermore, defective design work has led to abnormal increases in Bills of Quantities (BOQ) and frequent Variation Orders (VOs), in some cases exceeding the original contract price.

Such practices, the report notes, undermine the principles of competitive procurement and raise serious questions about the performance of consultants engaged for feasibility studies and project design. The audit emphasised that these consultants failed to exercise due diligence, resulting in flawed planning that ultimately burdened the national exchequer.

The audit highlighted that mismanagement in project execution has led to disputes, contract terminations, and litigation, causing significant time and cost overruns. A large portion of project expenditure was found to have bypassed competitive processes, further weakening transparency and accountability.

The AGP stressed that these issues are not isolated but reflect systemic weaknesses in procurement, contract management, financial oversight, and human resource practices. The persistence of such irregularities indicates that internal controls within the Ministry and its entities are either ineffective or deliberately ignored.

Among the most significant findings is an unjustified payment exceeding Rs10 billion to a contractor due to abnormal increases in BOQ quantities. The audit revealed that while the original BOQ for certain work items was estimated at Rs4.58 billion, payments had surged to Rs14.58 billion by the 48th interim payment certificate.

This massive increase, the audit concluded, was the result of executing quantities far beyond contractual provisions, indicating that work had commenced without finalising detailed designs in violation of National Economic Council (NEC) directives.

Although the management attributed the escalation to challenging geological conditions and necessary design adjustments, the AGP rejected this explanation. It maintained that such large discrepancies clearly demonstrate that the contract was awarded without adequate planning and that consultants failed to perform their responsibilities effectively.

In another alarming case, the audit identified unauthorised payments amounting to Rs4.63 billion made to a contractor without the delivery of equipment. These payments were facilitated through amendments in payment terms that lacked any contractual basis.

The AGP termed these payments as undue favour to the contractor, highlighting serious lapses in contract management and raising concerns about transparency in public sector dealings. Such deviations from contractual obligations not only violate financial rules but also erode public trust in government institutions.

The audit report strongly criticised the internal control mechanisms within the Ministry of Water Resources and its attached entities. Persistent violations of procurement rules, contract provisions, and financial regulations indicate a failure of oversight at multiple levels.

Audit observations revealed excessive payments, frequent design changes, delays in execution, and non-recovery of receivables. These issues point to weak financial discipline and ineffective monitoring systems.

The report specifically noted that internal audit systems, particularly within WAPDA, have failed to prevent recurring irregularities. This raises serious questions about their ability to ensure compliance and enforce accountability.

The audit categorised irregularities into several areas, with financial management accounting for the highest number of cases, followed by contract management, procurement, asset management, human resources, project planning, and operational issues. This distribution underscores that governance challenges are widespread and deeply embedded across all functional domains.

The AGP also flagged significant delays in several key water and hydropower projects that are vital for Pakistan’s water and energy security. These include Diamer Basha Dam, Dasu Hydropower Project, Mohmand Dam, NaiGaj Dam, and KurramTangi Dam.

In some cases, actual progress lagged behind planned targets by as much as 55 percent. The audit attributed these delays to poor planning, lack of feasibility studies, land acquisition problems, and weak project management practices.

The report warned that continued delays could lead to substantial cost overruns, reduced economic returns, and prolonged water shortages. Given the strategic importance of these projects, such setbacks could have long-term implications for national development.

The audit also highlighted a concerning decline in hydropower generation, despite the fact that hydel power remains the cheapest source of electricity in Pakistan’s energy mix.

According to the report, WAPDA’s installed hydel capacity remained unchanged at 9,389 MW over the past two years, indicating that no new hydropower projects were commissioned during this period. However, total hydel generation declined by 1,514 GWh, from 35,033 GWh to 33,519 GWh in 2024–25, representing a decrease of 4.32 percent.

The share of hydropower in the overall energy mix also declined from 25.56 percent to 24.81 percent. This trend raises concerns about increasing reliance on more expensive sources of electricity, which could drive up tariffs and burden consumers.

Beyond financial irregularities, the audit provides a broader analysis of Pakistan’s water sector, warning that the country is facing an impending water crisis driven by climate change, population growth, and mismanagement.

Pakistan’s per capita water availability has dropped to 819 cubic meters, placing it among water-scarce countries. The situation is further exacerbated by inefficient water use, depletion of groundwater resources, and rising levels of pollution.

The AGP emphasised that the challenges facing the water sector are not solely due to natural scarcity but are largely the result of governance failures, lack of planning, and weak policy implementation.

The audit expressed serious concern over the non-implementation of the National Water Policy (NWP) 2018, which was designed to address the country’s water challenges through a comprehensive framework.

Despite the passage of several years, the Ministry has failed to establish an effective implementation or monitoring mechanism. No periodic reviews have been submitted to the Council of Common Interests (CCI), as required under the policy.

Additionally, the restructuring plan for WAPDA, which was to be completed within one year of policy approval, has not been initiated. This reflects institutional inertia and a lack of commitment to reform.

The report also highlighted the increasing impact of climate change on Pakistan’s water resources. Frequent floods, droughts, and extreme weather events have exposed vulnerabilities in the country’s water management system. The devastating floods of 2025, which resulted in over 1,000 deaths and displaced millions, were cited as a stark reminder of the need for improved planning and disaster preparedness.

The AGP warned that without effective water management, the country could face severe consequences, including threats to food security, energy supply, and economic stability. In light of these findings, the Auditor General has called for comprehensive reforms to address governance weaknesses and improve financial discipline within the Ministry of Water Resources.

Key recommendations include strengthening project planning and feasibility processes, ensuring transparency in procurement and contract management, enhancing internal audit systems, and enforcing accountability for financial irregularities.

The report also stressed the need to accelerate the implementation of the National Water Policy and to address delays in critical water and hydropower projects. The audit findings present a stark picture of a system under strain, where poor governance, weak oversight, and inadequate planning have combined to create significant challenges in the water sector.

Copyright Business Recorder, 2026