Budget spending at local levels goes largely unreported

Kathmandu, Mar 21

Budget expenditure made by the local bodies is not properly reported both at the local level and to the central government.

In the last Fiscal Year 2018/19, local bodies in the country had Rs. 388.7 billion at their disposal. They mobilised about 79 per cent of that budget – Rs. 243.6 billion went to recurrent expenditure while Rs. 63.77 billion was capital spending.

But their budget mobilisation is not properly reported to the state and federal governments and in SUTRA (Sub-national Treasury Regulatory Application) – planning, budgeting and accounting software for all levels of the government.

The Financial Comptroller General Office (FCGO) said that it was unable to get the programme-wise expenditure from the fiscal transfers made by the federal government to the local bodies. It also couldn’t get the expenditure as per the proper classification while many local bodies reported their expenditure under the title that did not have any budget.

The FCGO is a government agency for treasury operation that oversees government expenditure against budget, tracks revenue collection and other receipts. However, in terms of local bodies, it was largely unable to get the actual status of the budgeting and expenditure. It prepared the Financial Report of local bodies of last year on the basis of available data.

Local bodies lack the skills and knowledge of planning, budgeting and accounting which has impacted budget mobilisation and its reporting, said Ramesh Prasad Shiwakoti, Joint Financial Comptroller General and Coordinator of the Public Expenditure and Financial Accountability (PEFA) Secretariat.

Meanwhile, about 11 local bodies have not yet passed the budget from the respective village or municipal council but they are operating all economic activities.

Some of the units have issued cheques with back date after the end of the fiscal year which is creating problems in fund management.

Manpower and technology

Most of the local governments do not have human resource responsible to maintain accounts. “The absence of technical staff at the local bodies has created challenges in operating the SUTRA and financial reporting,” said Niraj KC, information officer at the FCGO.

The FCGO had trained 2,733 government staff on SUTRA in the first phase and conducted the same training for 2,200 newly recruited officials. To make the accounting and reporting more effective, it had planned to train officials from all 761 governments in 23 clusters in April and May this year, but it was halted indefinitely due to COVID-19 threats.

Current budgeting system has also created challenges in the part of the local bodies as the federal and state governments continue sending grants to them even after they pass their budget.

Shiwakoti said that the provision of grants after finalising the budget needs revision in the reporting as well.

The SUTRA which is in operation in about 700 local bodies has technical and operational problems as it couldn’t address the entire need of financial reporting.

“It was our weakness that we implemented SUTRA in all 753 local bodies without piloting it. Therefore, we are troubleshooting the system. It will be completed by the end of this fiscal year,” said Shiwakoti.

Likewise, the FCGO is decentralising its support system to the states. Currently, the local bodies are getting the technical assistance from the Treasury Controller Office while there is a help desk at the central level which helps through direct telephone communication.

The FCGO said that the SUTRA would be effectively implemented in about 700 local bodies in the current fiscal year and will be expanded to the remaining units in the next fiscal.

Shiwakoti said that the progress so far was satisfactory as the local bodies were doing well even during the period of financial transition.

The provision

According to the constitution, accounting model of financial transactions of all 761 governments in the country should be as prescribed by the Auditor General. They should maintain their financial accounts as per the Government Finance Statistics Manual 2014 while the FCGO had developed integrated economic classification for reporting. 

The Local Government Operation Act also has similar provision. The local bodies should regularly send the four-monthly report of income in and expenditure from the reserve fund to the finance ministries at the federal and state level, Ministry of Federal Affairs and General Administration and National Natural Resources and Fiscal Commission.

Likewise, their income from the federal grants, revenue distribution, internal income and loan should be reported to the State Financial Controller Office and Treasury Controller’s Office.

Published in The Rising Nepal daily on 22 March 2020.